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Critical 05 Steps to Setup Dark Store

• Your Retail Coach
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What is a Dark Store? With digital shopping driven by the global pandemic here to stay, dark stores have become increasingly popular across the retail landscape in recent times. Dark stores are most commonly physical retail outlets or supermarkets which have been converted into eCommerce warehouses or online fulfillment/distribution hubs. Thus, these stores combine the strengths of online shopping with the comfort and convenience of a physical store to provide an optimal and personalized customer experience. Nowadays, with live videos becoming a part of a dark store’s showcase, associates can connect with shoppers safely, making them feel more empowered to make a significant purchase. These D2C (Direct-to-Consumer) business entities ensure customer well-being through a dark store online order and purchase process, same-day delivery, and in-store pickups. Dark stores are generally not open to end customers to walk in and buy. However, buyers can make digital purchases through dark store online shopping platforms, i.e. web stores or mobile apps, with the ordered items home-delivered or collected by the buyer from a pre-chosen location. Advantages of Dark Stores Dark stores are generally set up in and around customer strongholds or high-demand neighbourhoods, or even the city outskirts. A typical dark store consists of a 10,000 to 20,000 sq. ft space with around 15 to 20 workers present during a given time. The dark stores concept involves mid-size local warehouses used for storing, sorting, and managing orders, enabling a quick and cost-effective picking process, all of which can be easily automated. As retailers strive for customer acquisition and retention across multiple touchpoints, most retail businesses use a dark stores business model to reduce cart abandonment rates, lower rental costs, and boost overall profits by adding 3 to 4% to their overall bottom line. Since curb appeal isn’t a deciding factor, retailers can maintain a space in cheaper locations, and thus see the average order value dramatically increase by up to 200%. 05 Critical Steps to set up your very own Dark Store: Setting up a dark store requires careful conceptualization, meticulous planning, and execution. In the dark store consultants Middle East landscape, YRC (Your Retail Coach) is a leading retail management consultancy specializing in dark store set up. YRC’s expert team helps aspiring entrepreneurs to successfully kickstart their dark stores or online fulfillment centres, helping them to repurpose or convert an existing warehouse to a dark store to seamlessly cater to online consumer demand. The following are the various steps involved in setting up a dark store model:

• Build a Business Plan The first vital step is to create a comprehensive dark store business plan , i.e. the blueprint for the whole dark store, and it’s functioning. The business plan is a step-by-step guide defining the store’s roadmap laying down the nature of the business and its strategic goals and direction. The following are the key components of the dark store business plan:

• Executive Summary: This is at the beginning of the plan and provides a brief description of the dark store’s mission statement and products & services portfolio. • Business Description: This is a general overview of the key aspects of the dark store, including the history, goals, mission and vision statement, target clientele, and the USPs of the business, products, and services. • Management Plan: The management segment of the plan outlines the organizational structure, staffing plan, and management roles and hierarchy. • Operational Plan: The operational part of the business plan should clearly and transparently describe the functioning of the dark store, including the logistics and operational side. • Industry/Market Analysis: This is a quantitative and qualitative assessment of the market and industry, into which the dark store is venturing. • Competitor Analysis: This analyses the dark store vis-a-vis its direct and indirect competitors, including their SWOT (Strengths, Weaknesses, Opportunities, and Threats), and may include their current and potential product and service development. • Marketing Plan: This will showcase the marketing strategy for the dark store, how its products and services will be priced, promoted, and sold, and the budgets for these marketing expenses. • Sales Strategy: A sales strategy plan is the business master plan for securing stable, long-term revenues through the acquisition and retention of new and existing customers. It also includes go-to-market strategy. • Funding requirements: This outlines the future funding requirements and financial plans for the dark store usually for the next five years, especially for start-up businesses. • Financial Projections: This key section shows anticipated revenue projections for the business. The section generally includes a sales forecast, expenses budget, cash inflows and outlays, income statement, balance sheet, and a profit and loss statement.

• Decide the product categories, as per local demand: A key consideration for establishing a dark store is to decide the right product categories and the best location for the store, based on prevalent local demand patterns. The dark stores UAE market is mainly characterized by grocery, apparel, footwear, consumer durables, and home goods retailers. All these business sectors enjoy good local demand in most areas. The grocery dark stores concept is the most popular and has been universally adopted worldwide, including the dark stores UAE landscape, where Talabat and Noon have been pioneers. Because of the convenience aspect and the home delivery advantage, most buyers prefer to buy groceries online nowadays, and online grocery order fulfillment and delivery is facilitated by the dark stores business model. A critical challenge here is inventory replenishment, as retailers need to ensure that they can handle the dark store model, where the order fulfillment window is short. Therefore, the order management system should be able to send real-time inventory updates to websites. They should also monitor real-time inventory and replenish it quickly to reduce potential sales losses due to out-of-stock items. Thus, YRC’s experts can help in regulating inventory for your dark store, setting up inventory and order management systems to modify picking slots, and govern the order pickup times.

Inventory management systems should also be able to handle situations when customers do not collect orders as per their scheduled timeslots. Scheduling and releasing the order for dark store pickups based on order creation is vital. Issues pertaining to order modification like the addition of new products, cancellation, etc. can also be managed through the inventory monitoring system, even if the order is ready for picking. YRC’s team of retail experts can help your dark store optimally handle order fulfillment, allowing customers to return products to dark stores, or their nearest supermarket, as also maintain product quality, especially for fragile, frozen, or chilled items.

• Dark Store Layout Plan A critical step in setting up the online dark store is its layout plan, which provides the store’s floor space design, and the management and placement of items there. Dark stores require a good amount of space to accommodate products in large quantities. Retail store layouts are based on commercial factors and product category groupings. According to YRC (Your Retail Coach), a dark store can be laid out to drive efficiency based on time and motion studies. Through pallet pick locations, and rear fill shelving, along with fast, slow, medium, or bulky product groupings, there will be a significant rise in picking efficiency. Ensuring the right pick face capabilities based on sales velocity minimizes product replenishment. Further, YRC strategists understand that site requirements vary across home delivery dark stores to standalone ones. Home delivery dark stores require dark warehouse facilities, besides adequate space to accommodate delivery vans in fleets along with loading positions. YRC (Your Retail coach) dark store consultants Middle East can help you choose locations with excellent transport linkages and access to abundant local labour reserves. Dark stores also need a proper planogram, which makes it possible to place more products on shelves, and address consumer needs better vis-à-vis competitors. YRC-designed planograms help in reducing out-of-stock products and generate greater revenue. Better balance between shelf inventory and consumer demand lowers cost. Planograms also optimize shelf layouts stimulating purchasing behaviour through higher revenue generation. Consistent branding and an optimal marketing message lead to better client satisfaction and higher client retention. This leads to improved use of retail space, higher ROI, and optimal use of staff during shelf resets, thereby lowering cost and lessening buyer inconvenience.
• SOPs for Dark Store operations Standard operating procedures (SOPs) or instruction manuals are crucial to managing a dark store setup. SOPs defining the type and size of product assortments influence the store’s site design. They also help drive storage and picking space requirements, shelf types, and racking, and determine the temperature control regions for the store. Also, these process manuals help to drive product launches, plan the store type, guide employees through job training, ensure system integration and also help in product assortments for fresh goods to minimize wastage. YRC will help you to chalk out effective SOPs governing the entire daily operational process framework and helping to optimally document customer lead times, from the initial order to the final delivery collection. Process manuals/ SOPs also come with various operational benefits. Defining the service proposition, SOPs are conducive to effective implementation of all end-to-end dark store solutions forming the basis of the retail ecosystem. During the dark store setup, critical decisions about specifically catering to the local customer base or acting as a fulfillment hub for delivery orders have to be taken. The primary focus can range across home delivery or click and collect, but SOPs from the YRC team enable daily operations to be effectively mapped to understand possible bottlenecks or challenges ahead of detailed design and conceptualization. Dark store SOPs are also used as the store set up guidelines, detailing a list of things to do and avoid. This consists of preparing the dark store’s unique warehousing model, with demand forecasting and operational management strategies, techniques, and methods built-in to minimize loss and maximize profits.
• IT System Integration: Customer Ordering App, Back-end Inventory Management System, Order Fulfilment system, Last-Mile Delivery tracking, After-sales Feedback mechanism Dark stores necessitate a fully operational Order Management System (OMS) and Auto-Replenishment System (ARS) to ensure an optimum procurement framework. YRC helps you to choose and invest in suitable and cost-effective technology, software, and infrastructure, also helping you to implement the dark store’s overall IT integration and automation process. YRC’s dark store-focused consultancy services help improve the customer ordering application and website features and functionalities, ensuring last-mile deliveries and click and collect points, all of which impact warehousing and logistics. Dark store warehousing space allocation impacts transportation dynamics, with items arranged according to picking convenience. Applications and websites enabling the online order fulfillment mechanism need careful planning and execution. YRC experts also help you to build a properly functioning back-end inventory management system, order fulfillment system, and an effective after-sales feedback mechanism, along with a successful Wireframes & AI strategy that helps your dark store’s mobile apps and websites to function optimally and increase its overall reach. An effective order fulfillment system, inventory management system, and an after-sales feedback process can help dark store retailers to optimize order processing and customer experience simultaneously. A proper inventory management system helps channel customer requests to the right store. Customer ordering apps and websites should integrate automation to trigger real-time automated updates. Dark Store Consultants Middle East – YRC Investing in the dark store space and its constantly evolving technology and infrastructure is not easy. Hand holding you every step of the way, YRC’s consultants make it simple for you. Learn more about retail dark stores, and start your own online delivery business, with the expert assistance of YRC’s strategists. Based out of Pune, India, Your Retail Coach (YRC) is a premier retail eCommerce consulting firm specializing in a wide range of customized retail services, notably dark store consulting services. The company has years of proven expertise in online supermarket consulting, order fulfilment, and supply chain management behind them, and has successfully established franchise business models, and SOP frameworks across critical business functions. Led by experienced retail industry experts and market strategists, YRC has also been a strategic and transformational partner for profitable retail start-ups. If you are an aspiring dark store startup looking to set up your dark store in the Kuwait, UAE or other Middle East countries, contact YRC retail experts to discuss, about starting a dark store, growing exponentially and staying ahead of the curve.

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What are Dark Stores & How do they work? [+ case studies]

• Alecia Bland
• 3 years ago

• November 4, 2021

On-demand delivery is booming, and at the centre of this so-called quick commerce is the dark store – the customer-free store where online orders are packed for fulfilment in as short a time as possible.

If you think it’s just a trend for huge grocery companies, think again: retailers like Nordstrom have leapt aboard, and delivery start-ups have raised billions in funding in recent years. 

Here we look at how dark stores operate, how they’re profitable and why they’re on the rise – along with four examples to showcase dark stores in action.

What is a dark store?

The rise in eCommerce and a decline of in-store purchasing predated Covid, but the pandemic occasioned a surge in eCommerce growth that now has many businesses re-evaluating their use of retail space.

Dark stores do use physical outlets, but these spaces are eCommerce warehouses, distribution centres or micro-fulfilment hubs. Dark stores get their name from being dark – that is, closed to the public, since they are only used to fulfil online orders.

More common in the grocery and whole food sectors, dark stores are becoming increasingly prevalent in fashion, big box retail and the homeware & furniture industries.

These customer-free, highly automated stores combine the strengths of online shopping with the convenience of a physical store to provide an optimal customer experience. All a customer needs to do is place an order online and have it delivered directly to their door, or pick it up from a collection point.

Dark stores facilitate extra-fast delivery – which has become particularly popular in the grocery sector since the outbreak of Covid-19

How do dark stores work?

A basic requirement of a dark store is that it’s located close to the customer base to help businesses deliver rapid, on-demand order fulfilment and enable retailers to seamlessly satisfy eCommerce consumer demand. Dark stores operate around the clock to fulfil online demand.

Digitisation and automation are fundamental to the success of dark stores – however, companies looking to implement the dark store concept do not need to invest large sums of capital into full automation and AI technology. The fundamental operations of any dark store can be undertaken with a robust inventory software system , an efficient team of pickers and a store layout optimised for rapid picking.

The floor plan and layout of a traditional retail or grocery store is strategically designed to direct the flow of customers. Encouraging longer time in-store, tempting customers with end of aisle displays and POS impulse buys. Lighting, music, merchandise displays, and even carefully planned aisle space are all features used to enhance the in-store shopping experience.

A dark store differs to a retail outlet because it is set up solely for functionality and rapid order fulfilment. Basic warehouse racking is used to store inventory stock, which is strategically positioned for ease and speed of picking.

Dark store order processing is much like the steps taken for warehouse order fulfilment, however on a smaller scale:

• Online orders are received and processed
• Orders are electronically sent to the shop floor
• Employees pick orders displayed on a digital screen attached to their shopping trolley
• Multiple orders can often be collected simultaneously
• Orders are packed and shipped

In other words, dark store does not have any of the frills you would find in a traditional, customer-centric retail outlet.

Need to manage eCommerce inventory?

How to ensure a dark store is profitable.

Start with existing demand. Map out current online order demand currently being fulfilled by existing stores. Highlight areas where there is enough demand to shift out of existing stores before considering opening a dark store.

While some larger organisations are converting existing space into dark store distribution centres, this may not be a viable option for smaller SMEs. Seek out locations in nearby industrial locations that offer lower rents and offer better access for delivery vehicles and easy dispatch.

Selecting the right product categories and the best location are key considerations to ensure the profitability of your dark store. Location should be based on local demand patterns because this is critical to ensure fast order fulfilment and delivery.

Keep the fit-out simple and easy to navigate. Implementing an effective inventory management system is vital to monitor real-time inventory stock and manage inventory replenishment to avoid stock-outs.

• Read more:  Micro-fulfilment: What Is It and How Does It Work?

Why are dark stores on the rise?

Covid-19 intensified the trajectory of eCommerce with a dramatic surge in online shopping, contactless transactions, and on-demand deliveries.

Covid also highlighted vulnerabilities in the long – and often complicated – global supply chains of many organisations. The closure of a single company or even the smallest disruption could filter along the supply chain to affect delivery times. Shutdowns and shipping disruptions could suspend production on the other side of the world, leading to supply shortages.

As retailers are increasingly more reluctant to accept the risk of supply chain disruptions in the face of increasing pressure for on-demand delivery, dark stores are a way to help them succeed in qCommerce, or the ‘quick commerce’ era.

Location is key to a dark store’s success, since this has an impact on how quickly orders can be fulfilled

Why use a dark store?

Dark stores and micro-fulfilment centres are on course to become a retailer’s core strategy for solving supply chain vulnerability. Five of the many benefits offered by using dark stores include:

Dark stores enable fast and contact-free shopping

Covid-driven social distancing and safety measures have necessitated contact-free shopping. Dark stores enable consumers to purchase from retailers without having to enter the store. After placing an order online they can either pick it up or have it shipped.

Distribution and delivery are more efficient with dark stores

Transforming physical stores into dark stores expedites order fulfilment. By physically locating products closer to a specific market and including a variety of distribution options, last-mile delivery is quicker and more efficient.

Dark stores have more products and a larger audience

The layout of customer-free dark stores can be optimised for rapid picking, and improved storage capacity allows for a more extensive range of products. Meanwhile round-the-clock online accessibility facilitates broader reach, and potentially a much bigger audience.

Dark stores improve SKU management

Grocery stores particularly benefit from the dark store concept, focusing on storage and click-and-collect capabilities to significantly improve SKU management.

Inventory control is enhanced with dark stores

Dark stores can enhance inventory control, and companies can achieve larger order volumes in these customer-free zones. A single dark store can maintain the retail fulfilment of several other stores in the same geographical location.

Dark stores are ideal for contactless shopping – which has been booming since the Covid outbreak – either through pick-up or home delivery

Four dark store case studies

Tesco: the original dark store.

The term ‘dark store’ first appeared in 2009 when the UK’s largest supermarket chain Tesco opened their first customer-free supermarkets in Croydon, Surrey, and Kent. At that time Tesco was dispatching around 475,000 online orders per week from their 4,000 existing retail supermarkets.

With the supermarket struggling to cope with high demand from online orders and in-store shoppers having to contend with pickers and personal shoppers, Tesco needed to move their online picking out of its existing stores.

Tesco saw the dark store concept as a more efficient way to deal with the growth in online sales and projected opening one dark store per year. By 2013, Tesco was responsible for over 45% of online deliveries in the UK, had several dark stores and had opened six ‘dotcom’ centres in and around London.

How do Tesco’s dark stores work?

These highly automated dotcom centres are more efficient, provide a better service and a greater range of products. At their Enfield store 20,000 picking trays zip around the warehouse on conveyor belts, stopping at ‘goods to person’ picking stations where staff select products from the shelf and place them into the trays. Unlike other stores, aisles are laid out by picking location, not by category.

Each location has a mix of fast, medium, and slow-moving products, and easy-access phone apps are responsible for 35% of additions to baskets. Frozen is the only food category in the dotcom stores that uses picking trolleys. Once orders are complete, the trays are stored in a high-density storage unit in the centre of the warehouse before being loaded into delivery vans and dispatched to customers throughout the day.

Tesco recently launched Whoosh, a speedy home delivery service that offers store-to-door deliveries within 60 minutes. A third-party delivery partner transports orders by bike, so some weight and size restrictions apply to the service. Orders can be tracked via the Tesco mobile phone app.

In early 2020, Tesco announced they were set to open 25 urban fulfilment centres over the following three years. As competition in the fast last-mile delivery escalates,  Tesco is joining forces with 10-minute delivery service Gorillas  to offer 2000 items that will be delivered from mini warehouses utilising available space within existing supermarkets.

Tesco has seen a huge growth in online sales since it opened its first dark stores in 2009, and its dark store operations continue to evolve

Nordstrom: click and collect convenience

Nordstrom is a high-end department store that had 116 retail locations in the US prior to the Covid-19 outbreak. The company was an early adopter of eCommerce, and in 2017 they launched Nordstrom Local, a service hub of convenient, central locations in big cities and dense suburban locations.

These miniature local hubs are smaller than their traditional department stores and don’t sell anything directly. They offer customers a place to make pickups and returns and to take advantage of Nordstrom’s express clothing alterations.

In May 2020 after assessing its hit from the Covid pandemic, Nordstrom announced it would be permanently closing 16 of its department stores. Then in October of 2020 the company expanded its pickup services for online orders for NordstromRack.com, Nordstrom.com, and HauteLook.com

Why is Nordstrom shifting to the dark store model?

Nordstrom’s market strategy is to provide customers with a greater selection of merchandise and quicker deliveries while increasing convenience through their service offerings.

BOPIS (buy online, pick up in-store) appeals to shoppers wanting to collect purchases without having to wait in checkout lines. Customers can collect purchases at stores’ collection points, which can be quicker than delivery and means they don’t have to be at home when products arrive.

While the Nordstrom focus is mainly on the convenience of click and collect, customers can have products delivered via FedEx, and for international shoppers they offer deliveries via Borderfree, a global e-commerce provider. Borderfree allows customers to shop in their local currency and takes advantage of its speedy, reliable shipping network.

Nordstrom is an example of a non-grocery business that has turned to the dark store model

Bolt: from ride-share to food delivery and dark stores

Bolt started out as a ride-share and micro-mobility company under the name Taxify in 2013. The Estonian-based company started with the goal of making urban travel more affordable and more sustainable. Recently the company introduced ‘women only ride’ to connect women passengers with female drivers to improve women’s mobility and address safety concerns.

In late 2019 the company launched Bolt food, moving into the already highly competitive European food delivery market.  Bolt’s entry into the dark store business is part of a broader strategy  – with dark store operations starting in Estonia before moving into other countries where they have an existing food delivery presence.

What does the future look like for Bolt food delivery?

In a recent fresh round of funding Bolt has raised €600 million to support its expansion into the skyrocketing online grocery delivery industry. This investment brings Bolt’s value to about $4.75 billion. With the leading food delivery businesses competing on 15-minute delivery times, growing its dark store network will help to target and deliver the 15-minute delivery goal for last-mile deliveries.

But massive investment doesn’t guarantee success – many food delivery companies still struggle with profitability even after large investment boosts. But by investing in more dark stores, Bolt is better placed to maintain control over logistics and product quality as they take on the market leaders.

Startups like Bolt and Gorillas have raised billions of dollars in funding in recent years – which is in line with predictions that on-demand delivery will continue to grow in future

Gorillas: from order to door in 10 minutes

Gorillas is a German delivery company that launched in 2020 with the objective of supplying products to consumers within 10 minutes of them placing their order. The company earns revenue from product sales and delivery fees.

Gorillas currently operates out of hyper-local fulfilment centres or dark stores in several cities in Europe and the UK. It has a total of more than 40 micro-fulfilment centres that carry limited selections across a variety of products and deliver only to specific areas.

Gorillas has become one of the fastest food delivery techs to surpass a $1 billion valuation . One of their key investors was Delivery Hero, a leading company in online food delivery in Europe.

What employment model does Gorillas use?

As a point of difference,  Gorillas’ delivery drivers are employed directly by the company as a counter to the gig economy . But they have recently been subject to a series of protests and strikes by workers claiming that Gorillas are breaching contracts, not paying staff accurately and equally, and failing to provide safe equipment.

While the company argues that the strikes are illegal and has terminated the contracts of those found to be involved in industrial action, they have also been accused of violating German labour laws that require workers to have a break between 11-hour shifts. And they have also filled many of the positions left vacant by the sacked employees with gig workers.

Food delivery is set to become a $200 billion industry within the next few years, and competition is growing in correlation to the sector’s expansion. User-friendly apps, range of offerings and tech-enabled driver networks are all key to long-term sustainability. The Gorillas example shows how potential regulations to protect workers and how those workers are treated will also figure into the mix.

Article by Alecia Bland in collaboration with our team of inventory management and business specialists. Alecia's background is in ancient languages. When she's not reading a book with her cat for company, you can usually find her cooking, eating or trying to make her garden productive.

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Dark stores in retail: Concept, benefits, challenges, strategies 2024

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The dark store has been around the eCommerce world as the future retail model. It converts brick-and-mortar shops into fulfillment centers, thus not only satisfying customers with instant delivery but saving retailers tons of costs and time operating their businesses. 

The dark shop model is anticipated to generate $414.31 billion of revenue in 2033, a 30% increase from 2023. You’ve landed in the right place if you’re searching for effective strategies to leverage the dark shop and unlock your potential revenue. This article will shed light on all the aspects of the dark store model in eCommerce, covering its concept, benefits, challenges, and strategies for 2024. Let’s dive in.

What is a dark store?

How do dark stores work, why are dark stores popular, top 4 benefits of dark stores, top 4 challenges of dark store management, dark store order fulfillment: how does it work, how to ensure your dark stores run smoothly and effectively, does the dark store model work for all businesses, best alternatives to dark stores, what is the future of dark stores, how can magestore help.

A dark shop, also called a dark supermarket or a dotcom center is a physical retail distribution space or warehouse that exclusively caters to online order fulfillment. Unlike traditional stores that intend to attract walk-in consumers, dark shops are closed to the public and only address customers’ online orders generated from websites, mobile apps, third-party aggregators, or other online channels. They serve as distribution hubs for product inventory, package, picking, shipping, and everything dedicated explicitly to online order fulfillment.

In a simple explanation, the dark store model operates like a warehouse concept, featuring layouts optimized for picking, packing, and delivering. 

When a customer places items online, the order will proceed to dark store staff, and the fulfillment will occur in the dark shop. Based on the incoming requirements, the store pickers, available around the clock in the dark shop, will pick and pack the curated items. The order will then be directly delivered to the customer’s address.  Customers can also select and buy things online and arrive in-store for pickup.

The first-ever dark shop was launched in 2009 by Tesco, a supermarket chain in the U.K. This innovative retail model quickly spread worldwide as it required low costs to set up and fulfill online orders to leverage the power of online purchase. 

The surge in online shopping during the COVID-19 pandemic has fueled the significant presence of the model, encouraging more retailers of all sizes to jump onto the bandwagon. Dark grocery stores and dark clothing stores are some examples of dark store models.

The key reason why the dark supermarkets stay popular today is the rapid growth of eCommerce. By 2027, 23% of total retail sales will happen online. The rise of online shopping is significantly shaping customer shopping habits with the preference for ease, flexibility, and prompt delivery. As a result, building a dark shop is necessary for retailers to better prepare for the future.

One more reason for the model’s popularity is that establishing a dark shop is not a headache for retailers and saves them effort and costs compared to building a fulfillment center. Retailers can easily repurpose existing retail space or physical stores with low foot traffic to create new dark shops for fulfillment.

Dark store delivery helps enhance customer experience.  

41% of consumers expect their online orders to be delivered within 24 hours. Dark stores can accelerate the delivery speed because:

• They are equipped with automation technologies for order handling. Therefore, it takes only minutes to prepare items and hand them over to shippers.
• They are located near the end customers. Thus, you can deliver items to your customers on the same day.
• They are set aside for fulfilling online orders which allow customers to choose their preferred pickup time to avoid waiting lines and speed up the checkout process.

In today’s competitive eCommerce landscape, fast delivery is crucial for your success. 

Reduce costs  

Retailers can minimize operating costs since they don’t have to pay for aesthetic elements, inventory display and fixtures, in-store marketing, and other expenses related to operating physical shops. There’s no need to invest in an appealing or large-spacing storefront to attract customers. Moreover, running dark stores can save you 23% on delivery costs.

Improve inventory management  

Dark retail stores apply sophisticated inventory management systems that ensure fast speed and accuracy in real-time tracking, sorting, and picking processes. Thus, they enhance inventory management efficiency and reduce errors throughout the order fulfillment process. 

Flexibility and scalability  

Concepts like dark stores equip retailers with the agility and flexibility to quickly adapt to customer demands, market trends, and seasonal fluctuations. Without the constraints of physical stores, retailers can update more products, offering more options while managing their inventory easily. 

Along with numerous benefits, there are some challenges to take into account when establishing a dark store strategy and operating it successfully.  

Initial setup costs  

Setting up a dark shop requires significant initial investment in some aspects, including infrastructure, facilities, advanced technology, and staff training. Retailers should carefully elaborate on the cost-benefit analysis when creating a dark store strategy to ensure a return on investment.  

Operational complexity  

A dark shop “wears many hats” to address a vast number of online orders meticulously, from inventory management to order fulfillment and shipping. A dark store can’t handle these multitasks with simple infrastructure that lacks digitization and automation.

Workforce management  

Besides technology solutions, skillful employees are the backbone of a dark shop. However, it’s challenging to train and manage a workforce that’s capable of handling various tasks, including picking, packing, tracking, shipping, etc. This poses challenges on how to ensure their productivity and satisfaction to adapt to such a huge order volume.  

Dark store fulfillment, from when an order is placed online until it’s ready to deliver, may occur in minutes, following a smooth and automatic dark store management process.

• Order receiving : Once an order is placed through a website, app, or online platform, it’s recorded in the centralized management system and then electronically assigned to the staff. 
• Order picking : The pickers will collect the items based on the order details. Unlike traditional stores, where pickers have to collect items around the aisles with trolleys, the dark store has pickup areas designed for optimal picking. Items are segregated by order and have barcodes for the pickers to scan. The pickers, equipped with handheld devices or wearable technology, will gather the items from the picking areas for packing.
• Order packing : Once the items are gathered, they’re packed and sellotaped in suitable packing materials to ensure a secure and presentable package, especially for delicate or fragile goods. Each package is labeled with the order details, including the receiver’s address, phone number, or any relevant information, and ready for dispatch.
• Delivery or pickup : The packed orders are then dispatched for shipping through the in-house delivery team or logistics partners. The standard delivery channels include courier companies, postal services, and fleets. 

Store-to-door delivery is the most common method customers prefer as it’s fast, convenient, and contactless. The order is directly shipped to customers’ doorsteps. 

Customers also have the option to pick up items themselves at the dedicated pickup points, usually near or inside the store. Another service is curbside pickup . This way, pickers will bring out the ordered items for customers waiting at dedicated parking areas. 

Here, we break down several key factors that significantly contribute to the success of dark store management. They help retailers operate every stage smoothly and productively while meeting customer demands and generating benefits. 

Leverage advanced technology and automation  

Almost all stages of the dotcom center operation require technology application to streamline processes and enhance efficiency. Take order management, for example. This system should integrate with software or advanced platforms that facilitate efficient real-time tracking, picking, packing, and delivery. This way, the retailers can ensure order fulfillment and timely delivery to their customers. 

The more dark stores become automotive, the more operations are productive with fewer human errors. Some cutting-edge technologies for dark shops include automated sorting systems, robotics for picking up, conveyor systems, etc.

Invest in inventory management

The inventory management system plays a core role in the operation of dark retail stores. It’s crucial to apply advanced inventory solutions to ensure real-time monitoring and accurate stock tracking . Consider using barcode scanning , RFID tags, inventory databases, real-time updates, analytics and reporting systems, etc. These technology-driven solutions reduce human errors and the risk of out-of-stock situations, thus improving accuracy for better business decision-making.

Develop effective marketing to drive online sales

Dark stores are exclusively used for handling online purchases. To make use of them, apparently, you’ll need onlines orders. And to boost online sales, you should ensure that your brand, products, and services can reach more potential customers.

You can invest in marketing campaigns to increase customer awareness, drive traffic to your online channels to convert sales. Some effective marketing channels include emails, websites, social media platforms, marketplaces, or you can go omnichannel to sell on multiple platforms while centralizing and syncing all sales data in one place for better control.

In addition, you should strategically offer special discounts, upselling, cross-selling, or other marketing techniques to trigger customer needs. 

Hire and train staff

Staff members ensure smooth operations in collaboration with machines and technology. Retailers should invest heavily in training staff specialized for each stage to promote accuracy and productivity. 

Also, building a solid working culture can inspire and motivate them at work.

The dark store is not a one-size-fits-all solution since each business needs specific strategies tailored to their range of products, target customers, and markets.

It should be noted that this model is beneficial for retailers who heavily invest in eCommerce and online order fulfillment.  

For small-sized businesses that have a limited online presence and lower online order volume, the dark shop might not be a good fit as setting up it might overcast their budget and, therefore, make it difficult to generate benefits in return. 

Though offering numerous benefits, dark shops might not fit some retailers well. We recommend some alternative options that can be considered in terms of business needs and circumstances.

• Micro-fulfillment centers: Micro-fulfillment centers are used explicitly by eCommerce businesses to handle online orders. They are small-sized, highly automated, and located near existing stores to reduce logistics costs. There are only some slight differences between dark stores and micro-fulfillment centers. Dark shops are often used by larger retailers and can consume more space than a micro fulfillment center. Micro-fulfillment centers, on the other hand, are smaller, more compact facilities designed to tackle a smaller volume of products or categories. The latter is also preferred by retailers operating in areas whose property costs are high and focusing on same-day deliveries.
• Third-party logistics providers : Partnering with 3PL providers is an approach for retailers needing more means to create and operate a dark shop themselves. These providers offer solutions covering setting up infrastructure, order fulfillment, storage, delivery, etc., that take care of overall shady shop operations on behalf of retailers and enable them to focus on their core competencies.
• Store-to-door delivery : Store-to-door service allows customers to shop in-store, then the purchased products will be delivered directly from the stores to their addresses, typically their home or office.

The dark store model is expected to continue scaling and evolving to meet customer demands. The global market size is forecasted to grow by 38% from 2023 to 2033 . 

As technology is the backbone of dark shops, key trends that shape the future of this retail model include the leverage of technology to enhance operations. The years ahead are likely to witness technological advancements deployed in inventory management, order tracking, shipping, and other stages of retail fulfillment . Automation, robotics, and AI-powered chatbots are among them.

As sustainable development and green energy are a necessity, delivery solutions will be more eco-friendly, such as using bikes and electrical vehicles for delivery.

If you’re looking for a killer, technology-driven solution to leverage dark store management and operations to stay ahead of the retailing game, Magestore comes in with all-in-one weapons to level up your business to new heights, especially with order management . 

Smart inventory management

Once you integrate the Magestore shop management software in dark stores, you’ll be empowered with the best inventory management to track real-time inventory levels and monitor all inventory movement. 

The powerful inventory tool will give you a comprehensive look at in-stock, incoming, threshold, etc., to avoid stockouts and make informed decisions. The Magestore barcode management helps you quickly scan items and track stock status accurately without sweats.

Comprehensive reports 

By syncing and centralizing data across channels in real time, Magestore retail POS can generate reports covering orders, sales, and inventory. This gives you profound insights and live view into your business performance for accurate forecasts and business strategies. 

Staff performance

Magestore solutions can track daily, monthly, and yearly sales, thus reflecting on staff productivity. The system enables to set different permission levels for managers and staff, thereby streamlining operations. 

Flexible shipping methods

You can use in-built shipping methods such as DHL, FedEx, UPS, USPS on Magestore POS and retail software or integrate the POS with other shipping carriers to facilitate delivery. 

You can also incorporate the BOPIS model (buy online, pick up in-store) into your dark supermarket or provide curbside pickup on Magestore POS . 

Magestore solutions can be effortlessly installed in your dark stores. To save you time and effort on research, please contact Magestore experts . Our specialists will offer a 1-on-1 consultation and guide you step-by-step to seamlessly set up the system in your stores.

Why is it called a dark store?

The term “dark store” refers to a “ghost” store which is not open to the public. A dark store is not used to attract walk-in customers but solely to fulfill online orders. The dark store’s functions involve storing, picking, packing, and delivering.  

What do dark stores in logistics mean?

As a part of the supply chain network, dark shops in logistics refer to handling online orders to optimize the workflow and facilitate deliveries. 

What is the benefit of dark stores for a traditional store?

Dark stores can help speed up the checkout process at traditional stores in several ways.

• As built exclusively for fulfilling online orders, you can separate the online orders by shipping duration for better fulfillment. For example, orders with same-day delivery will be picked up at the dark stores, while orders with 2-day delivery will be handled at traditional stores.
• As often located in urban areas to be nearer to customers, dark stores can stimulate more customers to buy online and pick up items in store. That can help you reduce the shipping costs.

What are the key differences between a dark store and a warehouse?

A dark store is designed solely for online order fulfillment, including inventory handling, picking, packing, and delivering. 

On the other hand, a warehouse wears more hats, including retail distribution or manufacturing. 

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What Is A Dark Store? 10 Benefits for Retailers

• Updated: November 7, 2022

What is a Dark Store?

Online shopping has been and will continue to gain popularity which is encouraging retailers to be more strategic in their fulfillment methods. Micro-fulfillment is a strategy of placing smaller distribution centers closer to population centers in order to meet the needs of same-day or next-day delivery. When people discuss micro-fulfillment and micro-fulfillment center automation , the term “dark store” may arise. So, what is a dark store?

A dark store is a type of retail micro-fulfillment center that is repurposed from a retail location that is no longer profitable as a storefront. The term “dark” refers to the fact that these stores are not intended for customers to enter and browse. Rather, they are used solely for the purpose of fulfilling online orders. In other words, a dark store is basically an e-Commerce order fulfillment center that uses the existing infrastructure of brick-and-mortar locations.

Dark stores are designed to be more efficient than traditional warehouses, with specific layouts and processes that allow for faster order picking and packing. Dark stores usually have a smaller footprint than traditional warehouses, and are often located in urban areas to be closer to customers.

How does order fulfillment work in a dark store?

Dark stores can offer a few different types of order fulfillment, each with varying convenience to the customer and associated costs to retailers.

The two types of order fulfillment from a dark store is called “ship-from-store” or “click-and-collect.”

Click-and-collect (curbside pickup): Customers can place orders online and choose to pick them up at the physical stores. The customer will park in a designated curbside-pickup parking space, and an employee will bring the order out to the customer’s car.

This type of order fulfillment is becoming more popular amongst retailers as it offers customers the convenience of shopping online with the added benefit of being able to pick up their orders at their convenience rather than waiting on the delivery.

Ship-from-store: Customers can place orders online and choose to have them delivered locally. This is the most convenient option for the customer, however, it significantly increases costs for retailers.

10 Benefits of the Dark Store Fulfillment Centers

The dark store fulfillment model has several benefits for retail eCommerce businesses.

1. Reduced Delivery Times. Dark stores can help to reduce delivery times, since orders can be fulfilled more quickly than from a traditional warehouse, and they are typically located relatively close to the end consumer.

2. Convenient for Customers. Dark stores enhance the customer experience of shopping online , since they are more likely to be located near population centers.

In addition, the Pandemic has forever changed the trajectory of online shopping, the use of dark store fulfillment allows customer to shop contact-free.

3. Greater Visibility & Inventory Tracking. This store concept can help to improve supply chain visibility, since orders can be tracked more closely from the time they are placed until they are delivered. Greater inventory management, visibility, and accuracy means fewer out-of-stock situations and substitutions. Once you implement a dark store, calculating inventory accuracy is essential to establishing your baseline data.

4. Increased Flexibility. This model is also more flexible than traditional warehouse fulfillment, since dark stores are smaller and can be quickly adapted to changes in customer demand.

5. Lower Costs. The dark store model can help to reduce overhead costs, since dark stores are typically smaller and require fewer store employees than traditional warehouses.

These stores are often located near populated areas but are usually in more industrialized areas, which means lower (typically) lower rent costs than the average retail store.

6. Easier Perishable Management. The dark store concept can also help to improve perishable inventory management, since orders can be fulfilled more quickly and closer to the customer.

7. 24/7 Store Operation. Dark stores can operate around the clock which helps to further improve efficiency and customer satisfaction.

8. Optimized Layout for Fast Picking. In retail stores that are open to the public, the layout is typically designed to keep the customer in the store longer. For example, grocery stores put eggs and milk in the back of the store, so you have to walk through multiple aisles and products to retrieve them. In a dark store, the optimal locations for products are not based around the customer. Instead, more popular items are sometimes placed closest to the door, decreasing the picking, packing, and shipping time.

9. Dense Storage. Since dark stores are closed to the public, the layout can consist of narrower aisles and taller shelving for stock. Hence, more items can be stored in a smaller footprint.

10. Larger Product Selection & Audience. A wider variety of SKUs can be carried in dark stores because of the dense storage capabilities. Therefore, you can appeal to a broader audience.

The challenges of dark stores

Cannibalization. In-store retail sales could be cannibalized. If your customer-base switches to online ordering, self-service retail stores will have less revenue while maintaining the same operating costs. Therefore, profit of self-service stores would go down. This is why strategic site selection is important , and working with a supply chain consultant is crucial.

Competition. Customers are more likely to switch between online retailers to find the best deals because it’s easy and each retailer offers essentially the same convenience. It would take me 10 minutes to leave a grocery store and go to a different store in search of a specific product, but it only takes about 3 seconds to open a different tab in my browser and search another website. Therefore, the competition is higher online.

Cost. Transportation costs may end up being be higher depending on the location in relation to the customers. Home delivery routes can be long, and the need to fulfill click-and-collect orders at the store means that additional handling costs are incurred. These higher costs offset a significant portion of the reduction in picking costs achieved by moving picking out of the stores.

How to ensure your dark store is profitable?

1. Make sure there is enough demand.

If you don’t have enough demand for online orders or the right order profiles to yield enough profit, it might not be worth your time or money to set up a dark store. You need to make sure that you will generate enough business to cover the costs of operating the dark store.

2. Find the right location.

The key to a successful dark store is finding the right location. The store needs to be close enough to your customers so that home delivery is quick, but it also needs to be in an industrialized area so that you can keep costs low.

3. Choose the right technology.

You need to have a robust order management system (OMS) in place so that you can keep track of orders and stock.

If you offer delivery options, you need to have a good shipping solution so that you can get orders to your customers quickly and efficiently .

4. Implement an efficient picking strategy.

The layout of the dark store is absolutely crucial in keeping store operations efficient. Fast-moving SKUs should be placed near the packing / shipping area so that it takes less time for the product to move through the store and be ready for pickup. For example, in grocery stores, milk, eggs, and bread should be nearest the outbound door.

The use of batch picking (or fulfilling multiple orders at once) as you move through the aisles and shelving is an optimal pick strategy to reduce pick time.

Conclusion on “What is a Dark Store?” and “Is it Right for Me?”

If a retail location is no longer making a profit, it can be turned into what is called a dark store. These stores get their name from the fact that they are not open to the public– rather, they only exist to fill online orders. In other words, dark stores are e-Commerce order fulfillment centers that use old brick-and-mortar locations.

You should think about your customer’s demands and the distribution network in order to decide if dark stores are appropriate for you business. If you have a large number of clients who live in cities and require quick delivery, a dark store may be an excellent solution. A different fulfillment method, however, may be more suitable if you have a smaller client base or customers are distributed across a greater geographical region.

If your grocery, food, or retail business is considering dark stores as a way to offer better service and convenience around online orders and shopping, it’s very important to work with a supply chain consultant. A consultant can help you achieve healthy profit margins and ensure that retail store sales are not cannibalized.

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An Ecommerce Guide to Dark Stores: What It Is and How Does It Work?

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What is a dark store?

Why is the dark store concept growing, 4 benefits of using dark store for ecommerce retail, dark store order fulfillment: how does it work, how shipbob handles fulfillment for ecommerce brands, dark store faqs.

When it comes to shopping, customers expect instant gratification. That’s why many people love shopping at a local physical store; they can find what they’re looking for, make a purchase, and have it same day. But the pandemic made it more difficult to offer this type of shopping experience.

I n response, many physical retailers, from small to enterprise businesses, opted into what is known as a “dark stores” to offer more of their products online and using their retail space to store a large amount of inventory, fulfill orders, and provide more options such as fast delivery and same-day pickup.

Dark stores, also known as “retail distribution outlets,” have been highly beneficial for retailers of all sizes during the COVID-19 pandemic, but the concept isn’t anything new. In this article, you will learn more about dark stores, and what benefits they provide for growing ecommerce brands 

A dark store is a retail store (e.g., groceries, home goods retailers, and clothing brands, etc.) converted into a micro-fulfillment center, and its layout is organized and optimized for retail fulfillment for online orders . These retail distribution outlets are not open to shoppers, which provides more space store inventory and accurately fulfill orders for customers. Once the order is placed, items can be picked and packed in the dark store and either shipped or picked up by the customer locally. This provides retailers with options for local and all customers. 

The COVID-19 pandemic has had a huge bearing on retail, especially since social distancing has become the norm. In such circumstances, to allow customers to purchase from a brick-and-mortar retail store contact-free, retailers are leveraging dark stores, which create the space needed to fulfill orders for shipping or prepare them for pickup, without customers needing to enter a crowded store. 

Although dark stores have been a great solution during the pandemic, it is not a new concept. Dark stores are common in the UK, France, China, and other countries around the world. With that said, many industry experts say that this is just the beginning of the dark store trend , especially in the United States. Here are other reasons why retailers are converting their physical retail space into dark stores: 

1. Fast delivery solutions

Not only do dark stores create an opportunity to sell in-store merchandise contact-free, they also provide stress-free and fast delivery options. With dark stores, shoppers do not have to waste time finding a parking spot, rummage through the store to find what they need, and stand in long lines at the checkout. These fulfillment “hubs” allow for fast delivery for local customers, as well as offer affordable shipping for all other customers while keeping carrying costs low by leveraging their physical retail space. 

2. Efficient dark store picking

Dark stores simplify the picking and packing process by storing a large volume of inventory in a smaller space rather than a large warehouse. Dark stores are set up primarily to fulfill orders, which allows merchants to optimize the space for easy picking. This makes warehouse picking and inventory tracking faster and more accurate. 

3. Provides more options for customers

This year, shoppers got a taste of different options on how to receive their online orders, including curbside pickup, local delivery, and faster, more affordable shipping. Especially for essentials, like personal care items and groceries, dark stores also provide local customers the convenience to easily pickup orders or get them delivered as fast as same day. Because of this, these types of delivery options are most likely here to stay years after the pandemic.

Big retailers such as Walmart, Kroger, and Bed Bath and Beyond, have recently started experimenting with dark stores, in response to COVID-19. In September 2020, Whole Foods opened its first ‘online-only’ new store in Brooklyn, New York. But more local, small retailers are also seeing the benefits of using dark stores to not only serve local customers but to also expand their customer reach at a lower cost. Here are some of the reasons why dark stores are more than a passing trend.

1. Dark stores stock a vast range of products

Since customers are not allowed inside functional dark stores (and if they are, there’s a designated area for pickup only), its layout can be planned to enhance storage and picking capabilities. Improving storage capacity guarantees greater product assortment , while faster picking ensures that orders are fulfilled faster without compromising order accuracy . 

2. Better view of stock levels

Since dark stores are much smaller than a traditional warehouse, it’s much easier to track inventory levels. Many dark stores are also equipped with inventory management tools to help control stock levels in real time. These types of tools also help retailers identify whether or not they are stocking too much inventory (known as “ deadstock “) or not enough, which can lead to stockouts . By simplifying the inventory control process, you’re able to ensure you have an optimal level of inventory at all times. 

3. Increased warehouse efficiency

Sometimes, one dark store ends up supporting retail fulfillment of several stores within a geographic region. Since these warehouses are customer-free zones, where pickers can easily navigate aisles without having to dodge shoppers and their carts, dark stores are able to manage a large volume of orders. But not without the right technology. Though dark stores can easily provide more delivery options for customers, it can be a challenge to optimize dark stores without the right technology to automate fulfillment tasks.   

4. Increases in order consumption

Once shoppers get used to your brand’s fast, reliable, and accurate delivery of goods, they are likely to turn into long-term, loyal customers. The more options you’re able to provide your customers, whether it’s pickup options for locals or different shipping options, dark stores give the ability to provide more for your customers, which ultimately drives more sales and increases customer lifetime value . 

Dark store fulfillment is a strategic and profitable option for all kinds of retailers. But to be truly sustainable, it should provide multiple delivery and pickup options. Here are the three common delivery options for dark stores. 

1. Curbside pickup

Curbside make it easy for customers to pickup orders quickly. It usually consists of dedicated parking areas where a retailer employee will bring out the order so the customer doesn’t have get out of their car. This not only provides safety for customers during the pandemic, but it’s also very convenient.

2. In-store pickup

Many traditional dark stores have a dedicated pickup area inside the store and is usually near the front entrance. This way, customers don’t have to walk through the entire dark store to pickup their package. This provides convenience for customers and saves on delivery expenses. 

3. Home delivery

Especially for local retailers, home delivery has become more common. This allows for a fast, convenient, contactless delivery for customers, especially when it comes to essentials. But home deliveries can also be done by shipping orders to customers at a further distance by creating an online store and shipping out orders.

You can fulfill orders for shipment within the dark store, or if you don’t have the means to create a dark store, you can partner with a third-party logistics (3PL) provider to take care of fulfilling and shipping online orders on your behalf. 

ShipBob is a 3PL that offers best-in-class fulfillment with DTC and B2B distribution across the globe. With ShipBob, you have the option to split inventory across multiple fulfillment center locations to reduce shipping costs and last-mile delivery times. Partnering with a 3PL is a great option for any retail business looking to increase online sales and provide fast, affordable shipping while keeping logistics costs low.

ShipBob goes beyond a typical 3PL by offering years of fulfillment expertise, the opportunity to move into more warehouse locations as you expand, global fulfillment capabilities, and access to insights into your ecommerce supply chain using our analytics and reporting tool . This provides you the ability to outsource fulfillment while still having full visibility inside your logistics.

To learn more about how ShipBob works, click below to talk to a fulfillment expert and get custom pricing.

When done right, dark stores can help to increase logistics efficiency and provide more storage capacity. To learn more about this evolving trend in ecommerce, here are answers to some of the most commonly asked questions about dark stores.

What is the purpose of a dark store?

Dark stores make it possible for brands to stock more inventory as compared to a brick-and-mortar space with limited inventory storage. Especially during the COVID-19 pandemic, dark stores helped merchants with physical locations provide contactless delivery and pickup options for their customers.

Many merchants are seeing the long-term benefits of having one or more dark store locations as they’ve been proven to improve order accuracy, speed up fulfillment time, and offer more space to hold inventory. It’s also a great way to get order to customers faster by offering different delivery options 

Who should open a dark store?

A dark store is a great option for any retailer that needs more options and space to fulfill a large volume of online orders through their physical store. Ecommerce grew rapidly this year due to the pandemic, and it’s a trend that will continue. Retailers that once relied solely on selling products at a physical location can now quickly grow online sales by converting their physical space(s) into a warehouse to quickly fulfill orders and store more inventory.

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What is a Dark Store? The future of grocery and retail

The Rise Of Grocery Dark Stores: What Is A Dark Store & How Does It Benefit Your Business?

Dark stores are an exciting, post-pandemic fulfillment concept that is growing exponentially within the grocery industry. In 2020, many businesses were forced to reevaluate their customer acquisition strategies and come up with new ways to drive sales. Curbside pick-up and same or next day delivery became the standard and the difference between good or great service. Due to the demand in eCommerce, grocers and delivery services like Waitrose & Deliveroo have been moving to a hybrid retail model known as ‘dark stores’. So what is a dark store exactly?

Essentially, a dark store functions like a micro-fulfillment centre; there is no in-person shopping. Instead, orders are placed via an app, fulfilled by pickers at dark stores, and delivered to the customer’s home within minutes.

With the recent rise in eCommerce and decline of brick and mortar purchasing, dark stores are becoming the new method for driving sales and earning potential customers. This new concept is perfect for grocers, pharmacies and CPG brands interested in being leaders in the quick-commerce revolution. These hybrid dark stores combine the ideal scenario of 'curbside pick-up' for customers or riders, with the additional option of offering 15-minute delivery to your end customers.

So, How Do Dark Stores Work?

Dark stores work seamlessly with e-commerce stores or phone apps to fulfill the high demand of rapid delivery and on-demand order fulfillment. A dark store needs to be located within a certain km radius of its customers. This will help to fulfill the demand for rapid delivery and on-demand order fulfillment. It also enables brands to offer a seamless transactions from purchase to delivery.

Dark stores work around the clock and their fundamental operations can be undertaken with an advanced software system, like OrderGrid, a small team of pickers, and a store layout that is optimized for rapid picking.

Dark store order processing is very similar to order processing at a fulfillment centre or 3PL. However, dark stores operate on a much smaller and much faster level.

Step 1: Online or mobile app orders are instantly received & processed

Step 2: Orders are electronically sent to the dark store

Step 3: Employees pick orders displayed on a digital screen within 2 minutes

Step 4: Multiple orders can often be collected simultaneously

Step 5: Orders are packed in a few seconds

Step 6: They are ready for customers to pick-up and and riders to deliver

Why Are Dark Stores Becoming The New Trend For Grocers In The USA & Canada?

The pandemic has shaped the way consumers shop, and as a result, the way we structure our business models. Consumer hype is all about online shopping, and the convenience of curbside pick-up or same-day delivery is undeniable. This new standard of living gives grocers and retailers an opportunity like never before. For brands in the USA and Canada, the ability to capitalize on the 'dark store' model quickly will allow them to be leaders in the quick-commerce revolution.

Online shopping, contactless transactions, and instant delivery have become high in demand in the post pandemic era. The aftermath has created a surge in demand for online grocery and e-commerce. However, traditional online grocery continues to be plagued by slow delivery times, inconvenient delivery slots, high minimum spends and disappointing substituted or missing items which affects up to 80% of orders.

Dark stores are the solution to these issues and the answer for keeping up with the increasing pressure for on-demand delivery during the ‘quick- commerce' era.

To learn more about how you can set up a dark store for your business, contact us .

If you have inventory, we have ideas. Book a call to explore how we can optimize, streamline, and scale your business.

Dark Store Business Model – How Dark Convenience Stores Work

Last Updated on January 24, 2024

Dark stores concentrate on internet order delivery in high-demand locations. For retailers in large geographical regions and areas, the presence of dark stores is important.

Converting your retail room to a dark space will support you in a lot of ways. Dark stores will also play a vital role in supply chains in the future, according to a Deloitte survey. D2C (Direct-to-Consumer) stores enable services such as same-day delivery, online purchases, and store pick-up. 

Dark stores are distribution centers that only deliver internet orders. Customers are given the option of not having to go to the supermarket to pick up items and pay. Everything they have to do is place an order online and have it delivered to their house.

Instant providers are now the focus of e-commerce. As a result, retailers will set up a dark store to fulfill consumer needs and respond to consumers at all contact points in real-time. Regardless of the business model used, customers now want their service providers to be involved, omnipresent, and responsive across all business platforms. 

As the online delivery industry expands, the idea of dark stores is gaining ground in e-commerce. Consumers now want a stress-free shopping experience. Thus, getting goods from a nearby dark store is simple and convenient. Most retailers are adopting this tactic to reduce cart abandonment and raise sales.

The Rise Of Dark Stores 

A Dark Store, as the name implies, operates in the dark for the shopper. It isn’t one of those shops with a visually appealing storefront or decoration.

Dark stores were first launched in the United Kingdom with a common aim in mind: to provide click-and-collect delivery with online purchases. As a result, these retailers do not operate in heavy-traffic areas such as shopping centers or high streets. Instead, they’re tucked away in comparatively unassuming establishments geographically located along major highways.

Pickers scurry inside, gathering ordered goods for online shoppers and sending them off for distribution. Inside, you can see cars zipping in and out, picking up one order after another for delivery to the assigned pin codes.

If the supermarket is fully automated, you might also see machines choosing products and products, which necessitates, of course, greater product precision but also ensures much greater productivity. Many dark grocery store apps have come up over these years and have successfully made a mark in the grocery delivery industry like Cajoo and Gorillas.

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Purpose Of A Dark Store App

When opposed to a brick-and-mortar location with minimal product storage, dark stores allow brands to stock more inventory. Dark stores aided merchants with physical locations in providing contactless distribution and pickup alternatives for their customers, especially during the COVID-19 pandemic.

Many retailers are realising the long-term advantages of providing one or more dark store sites, which have been shown to increase order quality, reduce shipping time, and provide more space to store inventory. It’s also a smart way to expedite the fulfilment of orders to consumers by including a variety of distribution solutions.

Who Should Open A Dark Store App?

Any merchant that wants more options and space to satisfy a huge number of online orders from their physical store should consider a dark store app. Due to the pandemic, ecommerce expanded exponentially this year, and this trend is expected to continue. Retailers who formerly focused exclusively on selling goods in a physical location can now easily increase their online sales by turning their physical space into a warehouse, enabling them to quickly satisfy orders and store more inventory.

Why Dark Stores Are So Popular With Grocery Delivery Services?

Grocery has its own range of problems at the category level, such as the need for a significant number of SKUs and, of course, perishability. Furthermore, with the ‘good old’ street-side sellers and marts readily accessible and now even providing near-real-time doorstep delivery to their hyper-local buyers, online grocery stores are far less essential. 

All of this means that the challenge of supermarket eCommerce isn’t about making the online order, but also filling it and getting customers to return week after week, or even day after day. 

Although anyone from well-funded entrepreneurs to eCommerce behemoths like Amazon and Flipkart has tried their hand at hyperlocal grocery commerce, none have yet nailed it. The segment has become even more dynamic as brands like Spar and Reliance Smart invest in hypermarket eCommerce solutions and enter the fray.

Dark Shops enter the photo at this stage. They perform really well for groceries because they fix certain basic issues. Let’s take a look at how:

• The SKU Challenge

One requires a gluten-free 6-loaf box, whereas another requires a multi-grain, full-size pack of pesticide- and preservative-free home-made bread. When it comes to groceries, there might be as many SKUs for basically the same thing as there are customers, precisely because everyone wants their food their way.

Dark Stores can improve SKU management in a variety of ways by focusing on storage and click-and-collect capabilities. One, they save money on real estate by avoiding high-traffic areas in cities. Two, they will serve many online grocery stores at the same time, reducing real-estate costs. 

They also conserve space and they aren’t concerned about the retail experience, show, or in-store ads. As a result, dark stores will stock a lot more variety per item for a lot less inventory. Furthermore, the ability to improve SKU control improves distribution accuracy and avoids mix-ups, which are all too frequent in online grocery delivery.

• The Perishability Challenge

Both of the ingredients are in the same order: yogurt, pulses, and fresh spinach. Things in the grocery store have a variety of expiration dates. And they’re all supposed to be distributed in their perfect states at the same time. Crackers must not break, liquids must not leak, and airtight containers must stay airtight. It’s not easy to do this on a large scale. 

Unless there are dedicated facilities and procedures in place to ensure object freshness not only during packaging but also before it hits the consumer’s plate. That means filling online grocery orders isn’t as easy as taking an item off the shelves (assuming it’s in stock!) and putting it in the cart to be shipped whenever it’s convenient.

It necessitates flawless warehouse control, product replenishment, and order fulfillment – all of which must work in tandem to minimize the time between off-the-store-fridge and in-the-home-fridge. To put it another way, supermarket fulfillment necessitates pickers working at a high rate, which is difficult to do in a typical discount grocer where aisles are clogged with leisurely shoppers gliding around in their shopping carts.

• The Fulfilment Window Challenge

Online grocery shoppers don’t plan ahead more than a few days. Orders are sent not so much in advance as in the event of an emergency. And delivery is due the next day, if not the next day, which adds to the burden. 

Consider a scenario in which internet orders pour in at midnight, with arrival scheduled in time for the next day’s breakfast planning, i.e. in the early morning. Obviously, brick-and-mortar grocery stores are not the only place to meet such a need. As a result, there’s another grocery eCommerce problem that dark stores are much better at addressing.

To build a dark store app like Gorillas , it is important for you to completely understand the workings and the process of developing such an app.

How does Dark Store order fulfillment work?

For all forms of retailers, dark store app  fulfillment is a strategic and lucrative choice. However, in order to be fully competitive, it can offer a variety of delivery and pickup choices. The three most popular delivery choices for dark stores are mentioned below.

• Curbside Pickup

Customers will pick up their orders easily at the curbside. It normally consists of designated parking areas where a retailer employee can carry the order out to the customer without requiring them to exit their vehicle. Customers will be protected not only during the pandemic, but it will also be very handy.

• In-store Pickup

Inside many typical dark stores, there is a designated pickup area, which is normally near the front entrance. Customers won’t have to walk through the dim shop to get their package in this direction. Customers will appreciate the ease, and shipping costs will be reduced.

• Home Delivery

Home delivery has become more popular, especially among local retailers. Customers benefit from quick, simple, and contactless delivery, particularly when it comes to necessities. However, home delivery can also be made by building an online shop and mailing orders to consumers that are located farther out.

You may either fulfill orders for distribution inside the dark store or contract with a third-party logistics (3PL) vendor to handle fulfillment and delivery of online orders on your behalf if you don’t have the resources to do so.

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Benefits Of Using A Dark Store App

In addition to COVID-19, major retailers such as Walmart, Kroger, and Bed Bath and Beyond have recently begun experimenting with dark stores. Whole Foods will open its first ‘online-only new store in Brooklyn, New York, in September 2020. However, a growing number of small, independent businesses are seeing the advantages of using dark stores to not only serve local clients but also to extend their client base at a cheaper rate. Here are a couple of the reasons why dark shops aren’t just a fad.

• Dark stores stock a vast range of products

Customers are not permitted within practical dark stores (even if they are, they must use a dedicated pickup area), so the layout should be designed to maximize stock and picking capability. Improving storage space means a wider inventory selection, while quicker choosing ensures that orders are filled more quickly without sacrificing order accuracy.

• A better view of stock levels

Dark stores are much easier to manage inventory levels than conventional warehouses because they are much smaller. Many dark retailers already have inventory tracking software to help them keep track of stock levels in real-time. 

This technique will also help retailers determine whether they have too much inventory (known as “deadstock”) or not enough, which can result in stockouts. You will ensure that you still have an appropriate degree of inventory by simplifying the inventory management process.

• Increased warehouse efficiency

One dark store may sometimes be used to help the retail fulfillment of many stores in a given geographic area. Dark retailers can handle a huge number of orders and these warehouses are customer-free areas where pickers can quickly access aisles without having to dodge shoppers and their carts.

But only if the right hardware is in place. Though dark stores can easily provide consumers with more distribution choices, optimizing dark stores without the right technologies to automate fulfillment tasks can be difficult.

• Increases in order consumption

Shoppers who become accustomed to your brand’s fast, dependable, and accurate delivery of products are more likely to become long-term, loyal customers. Dark stores offer you the opportunity to do more for your consumers, whether it’s local pickup options or multiple shipment options, which eventually encourages more purchases and increases customer lifetime satisfaction.

Frequently Asked Questions For Dark Store Business Model (FAQs)

Q1) who gets to keep the code after development.

A1) The owner keeps code in all its entirety after development however a developer team is required at the back end to ensure smooth running of an app.

Q2) Can I customize my app after development?

A2) Yes, you can customize your app according to your needs after development. We also provide customization services.

Q3) How much would it cost to build a dark store app?

A3) To build a dark store app, the budget is around $25,000 to $40,000. The cost might vary depending on your feature requirements. A readymade dark store app may cost you approximately $10,000.

Anurag Jain

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What’s the key to dark store profitability?

Though e-commerce has been growing for years, store closures and quarantine guidelines during the COVID-19 pandemic dramatically accelerated consumer adoption of online shopping. Traditional retailers who quickly stood up online channels to meet demand now face a new challenge: making online channels profitable rather than losing margin on each sale due to inefficient, hastily developed processes.

Add to that pressure the emergence of a new disruptor in grocery and convenience retail: the rise of “quick commerce.” Quick commerce retailers like Delivery Hero up the ante, promising home delivery within an hour of order placement—with some companies promising delivery times as short as 10 minutes!

As consumer expectations for convenience continue to rise, all retailers—whether omnichannel, e-commerce, or quick commerce—must take action. Retailers are only beginning to explore utilizing networks of dark stores across densely populated areas to improve online fulfillment, but retailers need extreme supply chain efficiency to deliver on promises of convenience while achieving profitability.

AI-Driven Forecasting and Replenishment Drive Dark Store Availability

As retailers face rising expectations, they still struggle with older, more familiar challenges—for example, new product introductions and mixed assortments of both fast and slow movers. Fortunately, they can easily overcome these challenges with AI-driven technology, even when the pressure is turned up.

In today’s competitive environment, AI has become a foundational requirement to automate and improve forecast accuracy, improving dark store availability while eliminating hours of manual planning each week.

A solution using machine learning algorithms can help retailers model the complexities of demand variation, whether from planned promotions, weekday variation, seasonality, or localized demand-influencing factors such as events and weather forecasts. More importantly, it can do this automatically, processing more retail data than any team of human planners ever could. In today’s competitive environment, AI has become a foundational requirement to automate and improve forecast accuracy, improving dark store availability while eliminating hours of manual planning each week.

An advanced replenishment system can leverage that forecast to balance the risk of stock-outs with the risk of waste for every order based on inventory and demand levels—a capability that becomes extremely important when dealing with fresh products. While high availability is a crucial target for any retailer, it’s especially important for online retailers for whom substitutions can be quite challenging.

Space Optimization Improves Dark Store Picking Efficiency

While shoppers don’t enter dark stores, good space planning is still critical to meeting the value proposition of extreme speed. Because space is at a premium in small-format dark stores, inventory and space planning teams must work hand-in-hand to achieve the highest possible availability and the greatest possible speed—especially for quick commerce retailers whose goal is to pick orders within minutes of placement.

Dark store planogramming approaches can vary significantly from retailer to retailer depending on their picking strategy. Some retailers shelve items within a category together in a traditional, store-like planogram familiar to pickers. Others choose not to follow traditional planograms, instead separating similar items to decrease the likelihood of fast-moving pickers grabbing the wrong product for fulfillment.

Regardless of planogram approach, it’s a good practice to reserve an area for your most-picked items at the front of the store to accelerate picking speed for your highest-demand products. These “most-picked” items may change throughout the year based on seasonal trends or major holiday events like Halloween or Christmas.

The right planning solution can automate dark store-specific shelf and inventory optimization based on localized demand forecasts.

The right planning solution can automate dark store-specific shelf and inventory optimization based on localized demand forecasts. A unified system that draws demand data into planogram creation can optimize not only the shelf space per product, ensuring efficient inbound goods flow, but also localized product positioning, ensuring high-demand items for each store are easy to pick efficiently.

Furthermore, optimizing shelf space allotments to match localized replenishment plans for each product enables direct-to-shelf replenishment. And when replenishment plans are informed by local space plans, retailers can fill center store shelves up with fewer inbound deliveries. As a result, retailers see lower goods handling costs and less risk of stock-outs from items waiting to be shelved.

Anyone working in grocery and convenience today—whether quick commerce, e-commerce, or omnichannel retail—needs a best-in-class retail planning solution if they hope to compete for their shoppers’ online business. Accurate, granular demand forecasting is, of course, the foundation for high availability, but that data must inform both replenishment and space planning to fully deliver on the promise of fast delivery that will ensure repeat business from happy customers.

Jukka Uskonen

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The Inception of Dark Store – Benefits, Relevance & Challenges

A dark store is an order fulfillment center focusing on a faster shipment process with optimized logistics function & enhanced customer gratification. Home > Insight > The Inception of Dark Store – Benefits, Relevance & Challenges

2020 was a year full of change. While we as global citizens tackled our way from covid19 (and still are), industries, as we know, shapeshifted their model to survive an unprecedented economic challenge ever known to humankind. And brick & mortar stores, commonly known as retailer shops, found themselves staring down at potential shutdown scenarios owing to the restriction imposed due to pandemic curbs, leading to a minimum to negligible footfall.

This eventually gave momentum to a new customer shopping dimension through Dark stores. As customers avoided crowded places to prevent social contact during the restrictions, dark stores became a masqueraded boon for the entire retailer shopping experience, be it offline engagement or web-based order fulfillment.

In the write-up, we will cover why exactly dark stores came into existence, why they are a bright idea for the retail sector, and, more importantly, their relevance in today’s e-commerce-driven economy.

Table of Contents

• How do dark stores work?
• Benefits of the Dark Stores for Businesses
• Main Challenges of Dark Stores

How can 3SC help set up dark stores?

What is a dark store.

Also referred to as a dark shop, dark supermarket & dotcom center, a dark store at the start became a post-pandemic strategy for large-footed retail shops to eliminate their housed inventory. With retailers embracing web-based markets to counter economic blues, these stores slowly gained traction, with customers finding it easy to get their ordered goods through self-pickup options or delivery services.

Eventually, these dark supermarkets also started operating as fulfillment centers for online orders. With ‘click & collect’ becoming the norm & most preferred way of shopping for customers, the retail supply chain found a new lease of life with dark stores, ably managing complex logistics while seeing through the delivery objectives of every stakeholder involved.

How Do Dark Stores Work?

A dark store’s inception, like any other efficiently effective decision made in a sector, was done to keep the cost of operation in check, a situation more prominent owing to severe cash flow obstruction during the pandemic. To ensure that its logistical expenses are kept in check, dark stores got their establishment on the city’s outskirts, in sub-urban areas at a strategic location, making it easy for users to pick up their orders if they opt for it.

With automated tech & data analytics forming the backbone for its day-to-day operations, dark stores have pickers stationed at aisles who align products & make them ready for shipment. Stores with slightly advanced infrastructure costs have logistics robots to assemble & prepare orders, sometimes also fulfilling same-day delivery commitments. Here are the three most common shipping methods a dark store provides that boost supply chain operation.

• Curbside Pickup: A standard delivery procedure, which is slowly becoming the default choice for customers, curbside pickup involves delivering labeled products to a user at a dedicated open or parking space outside the store. This provides the highest level of safety for both the employee & the customers as it involves minimum interaction. As a phenomenon, curbside pickups have also gradually become the most preferred fulfillment method across sectors because of their convenient nature & hassle-free approach.
• In-store Pickup: With a dedicated pickup area usually stationed at the store's entrance, this pickup method focuses on less turnaround time for customers at bay when they reach to collect their order.
• Home Delivery: A self-explanatory term by now, home delivery was 'the' preferred mode of shipment chosen by the masses during the curb limitation. This eventually pushed conglomerates to develop contactless delivery to minimize unnecessary interaction with people while delivering the order.

What Are the Benefits of the Dark Stores for Businesses?

While dark warehouse existence was purely driven by a survival instinct of the retail sector facing a crisis in attracting numbers during the covid crisis, little did any supply expert knew that it just might be the blueprint for facelifting the entire e-commerce operation, which might happen to empower same-day delivery concept as well.

• Increased capacity with a reduced delivery cost: With additional storage helping sellers house more products, it effectively increases a store's sales density, leading to better economics in keeping inventory for forecasted demand, aided further by reduced delivery cost & better distribution network.
• Customer Gratification: Having dark stores at their disposal, organizations find themselves enabled to fulfill same-day delivery for the products ordered by the customers. It allows a company to increase its larger potential audience reach, resulting in improved brand value.
• Better Product availability: With better SKU management in place which leads to faster response time, a dark store warehouse coupled with its large area covering allows retailers to house products with slightly less market share to be available should a demand arise. Thus, helping a company bolster a diverse portfolio for its user base.
• Efficient Workflow: With data analytics & automation contributing towards daily processes – a dark store model pans out round-the-clock operations with almost negligible delivery errors.
• Better Management for Stakeholders: Dark stores enable logistics to take complete control of the order fulfillment process with increased customer experience. It provides an organization’s management with an extra edge to solidify its market standing further. A good user journey always lays the foundation for a company’s growth & dark store certainly up the stakes.

What Are the Main Challenges of Dark Stores?

While dark warehouses breathed life into a struggling retail sector when it needed the most, in due time, operators found a few catches along the way in the application of a dark store model.

• Increased Transportation: Though dark stores are located in a place that minimizes logistical costs, orders consistently involving more extensive routes start to hamper the expense sheet in the longer run. Such orders incur additional handling expenditure, leading to a higher workforce and extra capital.
• A Potential threat to In-store sales: With the curbs on restrictions now lifted, store owners bank on people returning to the usual way of in-store shopping. But as is the case, one can never predict how customer psychology presides over the economy. With users becoming accustomed to ordering from the comfort of their homes, dark store models have slowly set a monumental challenge for retailers to get back their footfall. While one always embraces new changes benefitting convenience for buyers, one has to take cognizance that it might be at the cost of a sector grappling for sustenance.
• Infrastructure Cost: A bit subjective opinion as it is based on what scale a dark store model works – but considering that a setup requires robust tech support, skilled labor, and a large operating area, among others, the initial infrastructure cost for setting up a dark store warehouse might pose a financial challenge.

3SC shapes up your fulfillment process by enabling your organization with end-to-end logistics operation . From order picking & processing to packaging and shipping, even last-mile delivery – 3SC, with its data-analytical insights & tech prowess driven by advanced artificial intelligence & machine learning, aid organization with improved delivery timelines & better customer retention scale with its marquee dark store strategy. So, if you're looking for a dark store with state-of-the-art execution & planning, connect with us now.

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Case Study: Big Basket Dark Stores

Dark Stores Meaning

The future of grocery retailing, dark stores are traditional retail stores or supermarkets that have been transformed into eCommerce warehouses or local fulfilment or distribution centres. Dark stores are currently in vogue in grocery, apparel, footwear, consumer durables, and home goods retailing globally. These D2C ( Direct-to-Consumer ) entities provide a hassle-free shopping experience to the discerning customer through a dark store online ordering process, same-day on-demand deliveries, and in-store and location pickups.

While these stores are not open to end consumers, a prospective buyer can browse through the dark store online via electronic media and mobile-friendly applications which offer a near real-time view of the product shelves. He can then make a web-based purchase through these digital shopping platforms, with the purchased products promptly home delivered or collected by the buyer from a pre-chosen location.

A dark store set up is generally near demand-centric populated neighbourhoods or areas. For retail segments like apparel, footwear, and durables, they could be even be located on the city outskirts. The dark stores concept consists of the setting up of mid-size local warehouses for storing, sorting, and managing orders, facilitating quick and cost-effective picking and easier automation.

Advantages of Dark Stores

Dark stores generally offer the following benefits vis-à-vis traditional retail stores:

● Closer to customers, easily catering to larger areas: Dark stores can cater to different locations simultaneously with high order densities, unlike traditional retail stores. ● Higher product stock variety and availability: Focused on online order fulfilment, the dark store model offers better inventory visibility and help e-tailers to plan and work smart. ● Reduced operational costs: Real-time visibility, space and time optimization, and efficient supply chain management make dark store theory a wiser choice financially, considering the volatility in the grocery market. ● Efficient customer service: Whether it is 24*7 order fulfilment, picking accuracy, or living up to the quality standards, dark stores have the requisite infrastructure to make it happen.

Big Basket: An Introduction

One of India’s leading online grocery hypermarkets , Big Basket was founded in 2011 by Hari Menon, V S Sudhakar, Vipul Parekh, V S Ramesh, and Abhinay Choudhari and is headquartered in Bangalore. Valued at $1.8 billion as of 2020, the company currently operates in 30 Indian Cities. The digital grocery platform offers a variety of products ranging from fresh fruits, vegetables, food grains, oil, masala, packaged snacks, bakery, cakes, dairy products, beverages, household care, beauty, kitchen, garden, pet care, fish, meat and poultry, baby care and healthcare products. It has more than 20,000 products and 1,000 brands in its online catalogue.

Big Basket’s Rejigged Business Model

For end consumers, Big Basket is essentially a delivery platform, while from the business perspective, the company covers everything from procurement, supply chain management, logistics, consumer services through subscription-based delivery, and even the food-tech sector with some local stores selling speciality items.

Big Basket Dark Stores thus essentially follows a hybrid model combining an inventory led wholesale approach and a hyper-local procurement strategy. The inventory led wholesale approach has been adopted for the high order fill rates and products with a higher shelf life. The hyper-local strategy comes in handy to procure perishable products in a just in time model to keep quality at the top and cost at the bottom. Big Basket has an easy-to-use mobile app and a website, which generate about 70% of its revenues. The remaining revenue comes from other businesses like hotels, restaurants as well as offline retail brands.

Big Basket’s Dark Stores Concept

The dark store model was initially conceptualized by Big Basket back in 2015 when it decided to go ahead with the dark store set up in several small warehouses or dark stores countrywide to facilitate faster order shipping for customers under its express delivery service. These warehouses would also help them to make a foray into the smaller towns. Big Basket’s strategy was to establish 10 such warehouses in each metro city in its network, and one each in 50 smaller towns. Through these dark stores, Big Basket has looked to expand its reach into the smaller towns and cities.

The Alibaba-backed E-commerce giant has till date depended on an asset-light model, under which it does not own physical retail outlets and uses dark stores/fulfilment centres or warehouses. Thus, it partners with third-party vendors, wholesalers, and resellers, and also sells private label products in important categories. These private labels are cheaper than established brands and are key inventory differentiators.

Big Basket’s Dark Stores India Delivery Framework

The online fulfilment centre or dark stores business model has allowed Big Basket to deliver in three formats, i.e. Express’ delivery in 90 minutes, normal (same day or next day) delivery, and a third format, where all items, irrespective of number or size is delivered in a maximum time of three hours after placing the order. The Express delivery model makes use of smaller dark stores, with the orders catering to items like milk, fresh fruits, and vegetables. In the normal order delivery model, all the stock-keeping units (SKUs) are available, and this constitutes the majority of Big Basket’s total online sales.

Big Basket has redefined the dark stores meaning. According to co-founder and CEO Hari Menon, under the new delivery model, Big Basket dark stores can deliver around 90% of items within two hours of placing the order, and 100% in three hours, all sourced from larger dark stores. Therefore, Big Basket’s dark store journey has evolved from an earlier size of 3,000 to 4,000 square feet to the current 25,000 square feet. These large dark stores need delivery personnel with both vans and bikes, while in the smaller dark stores, the delivery people use vehicles, i.e. bikes. A greater number of delivery slots imply lesser delivery travel time, thereby lowering costs, and speeding up the operational break-even levels. Initially launched as a pilot program in 2018, Big Basket now consistently delivers according to this supply chain model in Tier-1 cities.

BB Daily, BB Instant & BB Beauty Store

Since the middle of 2018 or so, Big Basket has also launched three new businesses, i.e. BB Daily, BB Instant, and BB Beauty Store. In BB Daily, buyers can subscribe for essential groceries like milk, fruits, and vegetables, bread, dairy, eggs, breakfast cereals, etc. BB Instant uses Big Basket’s unmanned vending machines to target corporate offices, tech parks, and apartment buildings in Tier I cities. Both Daily and BB Instant are available in separate mobile apps for convenience. Beauty Store is available on the Big Basket main app and consists of exclusive personal, skincare, and beauty products.

The future looks promising

With more than 10 million customers, Big Basket turned profitable during the nationwide COVID-19 lockdown in 2020, expecting to nearly double its revenues to $1 billion in the financial year ending March 2021. Despite cut-throat competition from arch-rivals Amazon, Grofers, and Flipkart (all of whom have adopted the dark store route in recent times), along with countless other local digital supermarkets, Big Basket continues to maintain its leadership position in the dark stores India landscape, being a part of the exclusive unicorn club. During the pandemic outbreak, Big Basket had seen its daily orders double to 400,000 with a 45% retention rate for first-time customers. The company had around 2,000 SKUs for in-house brands in 2020, which it expects to increase to 2,500 by the end of FY21, as it builds robust storage, cleaning, and packaging capacities for its private label products.

Your Retail Coach – Dark Store Consultants India

Headquartered in, India, YRC (Your Retail Coach) is one of India’s premier retail eCommerce consultants in Asia, specializing in customized retail solutions like dark store retail consulting services. The company has proven credentials in online supermarket consulting, order fulfilment, supply chain management, franchise business models , and SOPs across all critical business functions. Spearheaded by experienced retail industry consultants and market strategists, YRC has partnered with successful retail start-ups from a strategic and transformational perspective.

If you are looking for customized dark store consulting services to help convert your existing retail business into a profitable dark store, please connect with YRC experts and watch your business scale up and grow exponentially.

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PROCESS AUTOMATION

The idea of having Ecommerce Consultants on-board from the beginning itself points towards reducing the involvement of the promoters in daily operations. Ecommerce Businesses willing to be a brand reaping profits & sustaining the competition must ensure that most of their processes should be automated. The more the manual intervention, the more would be the errors.

In Ecommerce business, you get only 1 chance to impress the customer & if you mess up there, you lose the customer for long.

Process automation in respect to all the activities pertaining to customers from order receiving to order fulfilment is a must for a seamless experience for the customers.

Task Management is another grey area where most deadlines fail as 90% of the tasks are assigned manually & are forgotten, unheard, misunderstood or mistaken.

YRC Team of Ecommerce Management Consultants helps to make maximum of the processes system-driven to ensure minimalistic manual intervention.

VIDEOGRAPHY & PHOTOGRAPHY

No matter how good your product is, the customer would know only if it looks good.

Photography includes the following steps:

• Cataloguing your products
• Cataloguing your images
• Backup your images (A few cloud storage solutions include Dropbox, Google Drive, Bitcasa, Apple’s Cloud Storage etc.)
• Choose the right camera & lens (You may also outsource the photography to a third party agency)

DIGITAL MARKETING

Digital Marketing includes SEO & SMM. SEO i.e. Search Engine Optimization includes activities like back-linking, meta tags, blog-writing etc. to ensure your website ranks on the 1st page on Google Search.

Next comes SMM i.e. “Social Media Marketing” which as the name suggests including promoting your products on all the social media sites, email marketing, influencer marketing & several other BTL activities.

These activities are going to be recurring & would decide the traffic on the website, the conversions, whether the right target market is tapped, the likes, the views, the orders, the reviews & much more. YRCs Ecommerce Consultants create a budget for digital marketing right from pre-launch to launch & for each month thereafter.

Building digital marketing strategies in coordination with the agency, selecting them to signing them off would be the role of YRC.

This ensures seamless coordination, detailed interactions & desired execution as it is always advisable to work with a single agency than multiple of them.

IT INTEGRATION

Selection of the right software for smooth functioning of back-end operations right from production to webstore display would be suggested and integrated by YRC Team.

YRC’s Team defines SOPs of Product Movement, maps it with the locations & people. They then create a blueprint of all the features required in the software & help in shortlisting & selection.

IT Integration involves connecting your offline inventories with real-time online webstore so when a sale occurs, inventories get deducted real time across offline as well as online platforms.

This helps in accurate inventory management, maintaining the MOQs, re-order levels & achieving the optimum inventory levels.

Some popular software include unicommerce, viniculum for your front-end website management & Genisys for your entire back-end Purchase, Production, Accounting, Invoicing etc. management.

WAREHOUSE & LOGISTICS PLANNING

• How many cities or countries you wish to sell in?
• Where should your Warehouse be located?
• Should you have one warehouse in each country or city?
• Should you be having your own delivery team in your base city?
• Would the 3rd party vendors be reliable? What happens when they lose or misplace your product during delivery?
• How should I manage the logistics if my goods are coming from different countries?
• How should the goods be stored and barcoded?
• How much space do I require for warehouse?
• I am sure several such questions must be haunting you while you think of starting your own fashion ecommerce brand.

At YRC, our warehousing and logistics experts can help you devise a strategy for all of the above mentioned queries and much more.

We design the layout of the Warehouse considering the inward, goods processing, software entry, barcoding, outward, goods return, scrap storage, goods stacking & much more.

Logistics route plan is devised considering the manufacturer to your warehouse and from there to last mile delivery locations.

UI & UX DESIGNING

This Step involves 03 distinct parts:

Part 1: Choosing the right Platform:

From several platforms available in the market right from Shopify to magento, woocommerce, prestoshop, wordpress etc. you must choose the one that fits best for your business

Part 2: UX Designing:

“UX” denotes User Experience, which if put in simple language is building the functional requirements of the website.

UX Designing includes designing the features required in the website, customer journey map, website features, the browsing features, navigation features, ecommerce order management process flow, checkout cart features, catalogue management, ecommerce payment system, cross selling features & much more.

“As per statistics, 68% of the customers abandon the carts before payment”

An interesting UX ensures the customer sticks on to the website for a longer time.

Part 3: UI Designing:

UI stands for User Interface, which means designing the look and feel of the website. UI includes using the right colours, elements and the entire aesthetics of the website.

A good User Interface ensures the user completes the task that he has come for. It navigates the user through the journey of the brand in the simplest but most effective way.

The UX designer maps out the bare bones of the user journey; the UI designer then fills it in with visual and interactive elements.

If User experience is the bare bone, user interface wraps it up with an attractive cape.

At YRC, our team if experts can help you develop the entire User Journey to ensure it is engaging!

SAMPLING & PRODUCTION

This step follows the “Designing” Phase, whether you have an in-house design team, freelance designers or an outsourced design company. It is one of the most exciting phases, as here you see your designs turning into products & your ideas turning into reality.

In most start-up cases, production is outsourced i.e. brands tie-up with the established manufacturers/ job-workers to get their products manufactured.

Sampling involves multiple 04 Stages, Fit-Sample, Prototype Sample, Pre-Production Sample & the Production Sample.

Prototype Sample is the first sample provided to the buyer. It can be in any fabric/ colour. This sample is just to understand whether the product design looks equally great in reality.

Fit Sample, as the name suggests is prepared to check the fit of the garment i.e. the various sizes, length, width etc.

Pre-production is made by the actual production line. Here the stitching quality and other aspects related to manufacturing are checked. This is the last stage where rejection can be accepted.

Production Sample is made before the production which is the replica of what is going to be finally produced.

Once you are through with all this, you are good to go ahead & get your goods manufactured.

PRODUCT DESIGNING / SOURCING

Product Designing or Sourcing is the heart of the Ecommerce Fashion Brand.

Product Designing / Sourcing can be done in several ways, as follows:

• In-house Design Team
• Freelance Designers
• Outsourced Design Team
• Ready Product Sourcing (From Manufacturer or Wholesaler)

At YRC, we evaluate your business strategy & business model to arrive at the decision, which of the above ways would be best-fit for your business. In certain cases, product sourcing may be a combination of the above.

These are the people who are going to build your brand! Whether they are the designers or merchandiser, your brand look is going to be in their hands.

If you are designing each garment from the scratch, the sourcing would play crucial role in developing design identity of your brand.

Sourcing includes fabric, trims, lining & all the raw material required to build the garment.

Branding is the “Look of the Brand”, right from logo to tagline, the colours used, the brand story, the brand communications on social media, the packaging & all the other aspects which speak directly or indirectly to the customers. Branding constitutes the look & feel of the brand & hence must be thoughtfully planned to match with the product that we are selling.

Branding must appeal to our target audience. Example : A golden colour logo depicting finesse, art, richness, premium, however beautiful it may be individually cannot go with a brand selling affordable kids wear products. So, your logo must be in-line with your brand positioning, whether you are an expensive brand or a luxury brand or a value for money brand, it must be depicted from your “Branding”.

It is an integral part to attract the target audience.

ORGANOGRAMS & SOP’s

Organogram is the “HR Blueprint” of the business which is created at the onset, to map out the team required across each function at various stages of the business. At the launch, only key people need to be got on board to ensure the project gets started & at this stage, all of them need to multi-task. Similarly, certain financial as well as operational goals are set for addition of the further team. Example, for the operations team, we hire 1 operations manager during the pre-launch phase & we add 1 more only when the business kicks-off & we reach a volume of selling more than 1000 pcs/ month or a turnover of more than 0.1 million USD.

SOPs are Standard Operating Procedures, a bible to run the entire organization right from Sales, Purchase, HR, Order receiving to Order fulfilment, Inventory Management, Accounts, Warehouse, Logistics, Supply Chain, Production & all the other relevant functions for the business. Business must be organized from its first day of operations; only then the tasks can be delegated.

At YRC, we design the organization structure, the processes, and approximate time taken to execute each process, job profile of every member within the organization, their KRAs, KPIs & the Reporting Structure.

CRITICAL PATHWAY

Critical Pathway Analysis (CPA), is a project management technique which cannot be overlooked while launching an ecommerce fashion brand. Brand launch process is cumbersome with multiple inter-dependent & time-bound tasks involved, which need to be tracked to ensure the project remains on track.

CPA outlines key tasks across the project, their turnaround time (TAT) & the dependencies of tasks upon each other. It identifies the sequence of tasks, their interdependent steps from inception to completion, their criticalities, and their dates of onset, target dates of completion along with the key responsible person for the respective activities. Critical Pathway helps in understanding the unimportant & not urgent tasks which may jeopardize the execution of the project because of an unexpected snag! It also maps out the potential bottlenecks which might be posed because of the dependencies of tasks upon each other & cases where the next task cannot be commenced before the completion of the previous one.

CPA detects the minimum & the maximum time involvement of a particular individual or team to execute the task, thereby arriving at the overall deadlines associated with the project.

At Your Retail Coach, we design the Critical Pathway & review it periodically to ensure the project is on track & the progress is measurable.

BUSINESS STRATEGY & BUSINESS PLAN

Business Strategy includes the vision, mission, goals, business model, business plan & strategy for all the functions within the organization.

Business Strategy is a well-defined plan that outlines who, what, where, why, how & when for the company; for example, who would be the target market, how to attract the target audience, when to launch new products, where to operate from, how to handle competitors, what would be the USP, what would be long term goal of the organization & several other answers to the 5Ws of Strategy.

Business Strategy aligns the organization towards a common goal. Business SWOT helps company to identify & overcome their weaknesses & focus to sharpen the strengths. Business strategy forecasts future risks and helps business in building skillsets to overcome the potential threats.

YRC’s Business Plan focuses on creating a “Blueprint” of the business, thereby deriving the feasibility of the concept & gauge whether the opportunity is lucrative to invest time, energy & effort. Business Plan creates cash flow understanding i.e. building inflow & outflow cash projections from Week zero to week 60 i.e. 05 year projection. Business Plan calculates the capital investment, operating costs, one-time costs, recurring costs & all the other numbers relevant to obtain the breakeven sales, return on investment, return on capital, internal rate of return & several other ratios. Business Plan is also one of the important requirements if you are targeting the “Investor Route”. Fund raising becomes extremely transparent & channelized. With business plan panned out clearly, the business will know until what point must it be stretched & where to stop, which reduces the probability of unplanned investments.

MARKET RESEARCH

Starting the concept of Ecommerce Fashion brand with Market Research ensures we get detailed understanding of the industry & this research report also acts as a social confirmation for your concept. Market Research helps in understanding the target locations, their population, potential online buyers for your product, competitors for each category, and top selling products of the competitors, competitors’ price range, offers & their responses & much more. Market Research helps in thorough understanding of your brand position as compared to our competitors. It helps in identifying gaps in the market, in your category along with the scope of the said product in the desired market. This will help in validation of your concept & prevents you from making the same mistakes as your fellow brands, eventually saving your time, energy & efforts. This phase is also a make or a break phase, as the market research study may at-times come up with some eye-popping numbers & statistics which might compel you to re-think on your product or category that you are planning to sell or alter your entire concept itself!! Market Research Reports analyse the competitors’ webstore for their traffic, conversion & sales. This is extremely valuable information to derive our inventory budgets & projections, which takes us to our next phase.

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What is a Dark Store? Benefits for the Retail Industry

In 2020, retail stores had to rethink how they fulfilled increasing online orders and handled the reduction of in-store shoppers. Even as some customers headed back into stores to shop in-person, the appeal continued of quickly and easily buying items online to be picked up curbside or delivered.

When COVID started, online orders and curbside pickup or home delivery for food and other items became the norm rather than the exception. Consumers realized the ease, safety, and convenience and retailers ramped up their online order offerings. In fact, Technavio's market research report estimates the online food delivery services market will have a compound annual growth rate (CAGR) of almost 29%, with a growth of $631.84 billion from 2020-2024. 

Due to the demand for online orders, smart retailers are moving to a combination of in-person retail stores and a concept known as “dark stores”. There are lots of benefits of a dark store, but let’s begin with a definition of the term “dark store,” if it’s a new one to you.

What is a Dark Store?

When you hear the term “dark store”, you might think it’s a store that has closed down as the lights have been turned off, so it has gone dark. Instead, a dark store is a retail store that exclusively focuses on online orders. These stores, which have also been referred to as “back of store” or “micro-fulfillment centers,” don’t have in-person shopping. Instead, orders are placed online, fulfilled at these dark stores, and either delivered to the customer’s home within a few hours or picked up outside the store at the customer’s scheduled time. 

While dark stores can offer just delivery or just curbside pickup, the strongest stores offer both choices to give customers a choice. According to a Forrester consulting study , 35% of consumers choose shipping options like curbside pickup in order to receive their orders when they want them instead of waiting for a delivery time. 

In order to offer curbside pickup and same-day delivery, dark stores are typically set up in the suburbs and outskirts of cities. They can be located in the back of a retail store, or have their own separate building or space. Often, the site of a dark store is a former retail store that the owners needed to repurpose due to a lack of in-store business and razor thin margins. 

In the UK, Tesco opened its first dark store in 2009, but here in the US, retail stores have only recently started to make the move. Commercial real estate services firm JLL noted that Walmart has added automated mini warehouses, of 20,000 to 30,000 square feet, to its current stores to increase delivery and pick-up times. And they’re not alone. Research and Markets found that annual micro-fulfillment center installations will grow more than 20x by 2030, from a total of around 50 in 2020 to roughly 6,600 dark stores in 2030. Further, they noted that there will be one micro-fulfillment center for every 10th of the U.S. total 40,000 retail stores by 2030.

5 Benefits of a Dark Store

There are five top reasons why a retailer  store would want to create a dark store:

• Order accuracy . The orders are placed on what is actually in the store at any given time, so the customer gets what they ordered instead of a replacement chosen by a designated shopper.
• Inventory management . The accuracy holds true for both orders and inventory, as items are scanned and inventory records updated the moment that an item is taken off the shelves for an order.
• Reduced cycle time . Customers want their orders within a day, if not within an hour in some cases. Melissa Valentine, Director of Retail Global Accounts at Locus Robotics, states that dark stores offer increased speed and efficiency, which reduces the cycle time to the customer receiving their order. 
• Reduced spend on design . Dark stores don’t need to have the sleek aisles and end caps of a retail store. Instead, they can look like a warehouse, which saves the store owner money that can be spent on automation and technology.
• A combination of human and robot workers . Smart dark stores use a combination of humans and robotics with the human associates focusing on the tasks that require brain power and aren't as tough on the body. 

Robotics in Dark Stores

AMRs such as those from Locus Robotics will help improve dark store and back of store operations in all areas, including each (or piece) picking; pallet transportation; case picking with pallet moving; and heavy payloads.

Valentine says, “AMRs from Locus Robotics can help profitably fulfill orders in dark stores as retail stores notoriously have razor thin margins and lose money on in-store fulfillment. With the lack of infrastructure needed, we can easily drop into a dark store and mobilize Bots around their network as Retailers keep working through their fulfillment strategy. As their strategies change, our Bots can scale up and grow with them.”

The Locus solution dramatically improves worker productivity for your dark store or brick and mortar retail store by 2x to 3x, enabling higher pick rates, lower labor costs, and faster cycle times. In addition, your warehouse associates can seamlessly alternate between picking and re-stocking/putaway, helping improve the overall efficiency of your warehouse operation and save labor costs with true task interleaving.

Ready to learn how our Locus solution can help you optimize your retail warehouse or dark store automation and improve efficiency?

Let’s talk!

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How dark stores are powering growth of quick commerce players

A strong network of dark stores is powering the growth plans of quick commerce players, even as they battle against market challenges.

• Print Edition: Apr 02, 2023

Raghu Rai, who is in his early 30s, loves his job. The delivery executive has graduated to a scooter from a bicycle within two months of joining Zepto, a quick commerce start-up. “It’s a satisfying job where I get to meet different kinds of people. It’s thrilling, too, as I race against time to deliver groceries,” says Rai. Then there is Guddu Kumar, 24, a Swiggy Instamart delivery person who moonlights at Zepto. His day starts at 7 am when he dons the orange Instamart jersey and cycles through Byculla, Mahalaxmi, Lower Parel and Prabhadevi areas of Mumbai, delivering groceries. Come afternoon and Kumar undergoes a sartorial change—slipping into Zepto’s purple T-shirt. “Both jobs require me to work about seven hours and that seems doable since both have a solid tech infrastructure. But what stands out is that neither company penalises me over a delay in any order,” he says, smiling.

Rai and Kumar are obviously happy with work and life, but are customers happy with their employers—quick commerce players that promise to deliver anything from fresh strawberries to washing powder at their doorstep in a matter of minutes? To find out, Business Today placed three identical orders of potato chips and fresh strawberries on Instamart, Zepto and Blinkit. All three players have their warehouses, known rather spine-tinglingly as ‘dark stores’, within 1.5 km from the BT office in Mumbai’s Lower Parel.

The first to deliver was Zepto, in a smart 6.35 minutes. It was also the cheapest at Rs 150, as Zepto doesn’t charge for delivery. The next to arrive was Blinkit, which delivered our order in about 10 minutes with zero delivery charges as the order value was above Rs 149. Else, it would have charged a delivery fee of about Rs 20. The final delivery came from Instamart, in 14 minutes; plus, there was also a fast delivery fee of about Rs 35.

Still, the timelines are impressive. How is it possible to deliver so quickly? The secret sauce is a network of dark stores across cities where these companies offer their services. A dark store is essentially a retail facility resembling a mini-warehouse that houses goods to fulfil online orders. The difference: it is not open to the public. In fact, it is usually out of bounds even for most employees, except those who actually work there.

For instance, Zepto, which has 200-250 dark stores in Mumbai, Delhi-NCR, Bengaluru, Hyderabad, Pune, and Chennai, doesn’t allow delivery personnel to even peep into these mysterious structures. “We don’t want our competition to know what is happening inside our dark store,” says Aadit Palicha, Co-founder & CEO of Zepto. “We have optimised to a point that within 76 seconds of an order being placed, the order is packed and made ready for pickup. So, the tech we use is a trade secret, and we wouldn’t want anybody to get wind of it. The SOP is to not let anybody in. There are tighter aisles, and SKUs of frequently ordered products are accessible.”

Dark Deliveries

Dark stores are typically 2,500-3,000 sq. ft in size, and are carved out of shuttered buildings or gone-out-of-business stores, and allow the companies not only to save costs, but also reach deep corners of cities and even semi-urban areas.

Due to their nature, it’s difficult to spot a dark store—it is not likely to keep its front doors open for you to watch or waltz into. The only way to figure out that there’s a dark store in a locality is by spotting delivery people waiting around to pick up orders. For instance, we figured out where Zepto’s dark store was in Mumbai’s Lower Parel by spotting delivery staff milling around a location in their purple T-shirts and helmets. Similarly, you’ll spot the orange jerseys of Swiggy’s Instamart and the yellow jerseys of Zomato’s Blinkit.

How does a dark store function? After keenly observing the Zepto dark store and speaking with several industry insiders, we zeroed in on the following modus operandi: When a user places an order on Zepto, the system at the store showcases the list of items on a screen, and within two minutes a store staff packs it in a paper bag and places it in a pigeonhole, located near the entrance of the store. Meanwhile, a delivery partner who is closest to the store (or within less than a 1-km radius) gets a notification asking her/him to accept the delivery.

Upon accepting it, the delivery partner reaches the store in the next couple of minutes and gets a prompt about the rack number of the pigeonhole. She then scans the barcode of the rack, opens the paper bag to confirm the items, and then sets off for her destination. With the clock ticking, the delivery partner has about 8-10 minutes to make the delivery. The workflow at the two other companies is largely similar. Quite obviously, the most essential ingredient in this flow is speed.

The bright side

Speed, rather unparalleled acceleration in orders, is what the online grocery delivery business in India saw during the lockdowns induced by the Covid-19 pandemic. According to data analytics website Statista, the Indian online grocery market nearly tripled in size from Rs 15,000 crore in 2020 to around Rs 40,000 crore in 2022. Angshuman Bhattacharya, Partner for Strategy & Transactions at EY Parthenon, expects that number to skyrocket to Rs 2.1 lakh crore by 2027. It is, therefore, hardly a surprise to see so many companies interested in this business.

“Dark stores are critical to the development of hyperlocal infrastructure being fielded by e-commerce, D2C and quick commerce companies,” says Bhattacharya. “India, amongst other markets, is seeing rapid growth in quick commerce and foodtech, which has made the dark stores a critical micro hub of delivery.” Adds a spokesperson of Blinkit: “The quick commerce business is dependent on various factors such as the availability of products from the brand, seller ability, and supply chain capacity. Dark stores play an important role in this equation.”

Running a dark store, according to Palicha, is not very expensive: “It’s about 5-8 per cent of the revenue... it just has costs like rent, electricity, and employee expenses. So it’s definitely not more than 10 per cent.” Palicha also says dark stores are strategically placed after having studied a locality. “A Gujarati-dominated area would have more Gujarati groceries as SKUs. Apart from this, factors like population density and demography also come in. When we open a new dark store, we see the range of customers it will be able to reach, the average expenditure of delivery, and how is the accessibility offline.” For Zepto, atta, dal, rice, and packaged foods are the most profitable. At the same time, the company is also expanding into electronics, make-up and skincare products.

“Today we have an assortment of thousands of SKUs spanning 80-90 categories,” says a Swiggy Instamart spokesperson. “We have kept a close watch on what consumers want and have always been the pioneers while experimenting with new categories, such as gourmet and international assortment, and certified organic vegetables.”

A challenging industry

Delivering groceries in less than 10 minutes is not an easy process. “Hyperlocal delivery costs are high, and driving the right density of operations to break even on costs is critical. Also, customer acquisition costs are high, and maintaining repeat purchases is key to driving lifetime value,” says Bhattacharya of EY.

These challenges came home to roost for many players who rushed into the quick commerce space when Covid-19 was in play. The lifting of lockdowns saw a decline in demand, rationalisation of promised delivery timeframes, and even layoffs. Some players like Amazon Fresh and Google-backed Dunzo (where Reliance Retail holds 25 per cent stake) scaled back their operations in the ‘10-minute delivery’ space while others like Swiggy’s Instamart and bbnow by Tata-owned bigbasket revised their delivery timelines. Swiggy is believed to have laid off 380 employees. Blinkit (formerly Grofers)—which was sold to Zomato in 2022 for Rs 4,447 crore—is also believed to have laid off around 120 people. As for Dunzo, it is believed to have laid off about 3 per cent of its workforce in January 2022 and pivoted to 60-minute deliveries in mid-2022. However, Zepto, one of the youngest players, managed to survive without any job cuts.

Founded as KiranaKart in 2020 by 19-year-olds Palicha and Kavilya Vohra, Zepto is now a soonicorn with a valuation of $900 million, according to the company. It last raised funds in May 2022—a Series D round for $200 million led by Y Combinator’s Continuity fund. In fact, all prominent players (or their parent firms) in the quick grocery delivery space have solid financial backing. Swiggy, valued at $10.7 billion, owns Instamart, and is backed by Prosus Ventures. Its list of investors includes Baron Capital Group, Sumeru Venture, IIFL AMC Late Stake Tech Fund, Kotak, Axis Growth, Sixteenth Street Capital, Smile Group and Qatar Investment Authority, among others.

Meanwhile, Blinkit’s parent Zomato is banking on the quick delivery subsidiary to take it to profitability and rescue it from the stock markets, where it has seen stormy times since it listed in July 2021. “A vertical that can take Zomato on the path to profitability is its recent acquisition, Blinkit, apart from Hyperpure,” says Karan Taurani, Senior Vice President of Elara Capital. Hyperpure is also a grocery delivery service, but it is restricted to the B2B space. Tata-owned bigbasket, which runs bbnow, also has the financial heft and network of the salt-to-software conglomerate, the Tata group, to fall back on. bigbasket is believed to have nearly 200 dark stores.

With the opportunity so large, quick commerce players are moving quickly to gain heft. “We believe we have only scratched the surface in quick commerce grocery,” says Swiggy’s spokesperson. “As category creators, we will continue to invest in growing the category with a focus on offering convenience and other key things like selection, availability, and reliable and fast deliveries which consumers look for.”

Blinkit is working on increasing its reach with more and more dark stores, while at the same time also attempting to provide faster delivery at a lower cost. Says a company spokesperson: “We will continue adding categories and geographies that will make sense to our business while working on the P&L simultaneously to ensure healthy unit economics.”

Zepto has big plans, too. “We plan to multiply dark stores. If we stop opening new dark stores, we would be profitable in 2024, but we will not stop. We plan to open more stores and expand our delivery network. So, profitability is still afar. The utlimate goal is to be a publicly listed company, so we would be working towards that,” says Palicha.

With so much action, Bhattacharya expects consolidation to swing in at some point. “Consolidation is very likely as the growth phase involves cash burn and some players may find it difficult to sustain,” he says. “However, the segment is likely to witness increasing momentum as consumers get hooked on quick commerce. The definition of quick commerce may get relaxed to hours rather than minutes, providing some buoyancy to profitability.”

Whichever way the pendulum swings, one thing is clear: with quick commerce scaling up like never before, the network of dark stores in India is only likely to get bigger.

@r_dhanrajani

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Business | Wawa opens first North Carolina store on the Outer Banks this week

“Being 6 years old at the time, those things stick out in my mind,” he said.

McCombs, now an Outer Banks resident, was on hand for a community preview Wednesday, a day ahead of Wawa opening its first store in North Carolina at 1900 N. Croatan Highway. He said he was shocked when he returned from the Vietnam War and saw the Wawa dairy in Folsom, Pennsylvania, had become a Wawa Food Market.

Today, the family- and employee-owned Wawa chain operates 1,050 stores in seven states and in Washington. The closest store to the Outer Banks was in Chesapeake.

The Kill Devil Hills Wawa, at the corner of Fourth Street and U.S. 158, begins a 10-year expansion into North Carolina that will include 90 stores across the state.

By the end of 2024, Wawa will have 10 stores in Kill Devil Hills, Rocky Mount, Elizabeth City, Greenville, Wilson, Goldsboro and Lumberton, said Jay Ratcliffe, the company’s area manager for northeastern North Carolina.

Next year, Wawa plans to open 11 stores in additional counties, including Robeson, Pitt, Cumberland, Onslow, Johnston, Pender, Nash, Brunswick and New Hanover.

Over the next eight to 10 years, Wawa plans to build and open six to eight stores per year reaching a total of 90 in the state. Wawa will invest more than $7 million per store and employ, on average, 140 contractors, the company said in a news release.

“It’s an aggressive build plan,” Ratcliffe said.

Once open, each store will employ an average of 35 associates with Wawa expecting to create more than 3,000 long-term jobs in North Carolina.

Wawa chose the Outer Banks for the first North Carolina store because of its proximity to Virginia, as well as the local “sense of community,” said Kim Dowgielewicz, director of store operations.

The 6,000-square-foot store has eight gas pumps, 52 parking spaces and two underground tanks. It is set to open at 8 a.m. Thursday with free shirts for the first 250 customers, a hoagie building contest between local first responders and charities and a ribbon-cutting at 10 a.m.

The chain got its name from the town where it opened its first dairy operation — Wawa, Pennsylvania — in 1902. Wawa is said to be a Native American word for Canada goose, and company officials played on that connection for the new store about a mile from the Wright Brothers National Memorial, where Wilbur and Orville made their famous first flight.

Thursday’s grand opening festivities will include a flight over the store in a nod to the area’s aviation history, Ratcliffe said.

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